Coin Flip Challenge: The Importance of Bet Sizing and Surviving Volatility

Posted on August 24, 2025 // 3 Comments

In the book Missing Billionaires, Victor Haghani and James White argue that through the power of compound interest, there should be many more billionaires around – simply through time, even with modest investment performance. The reason why there are “missing” billionaires is not because they didn’t find the optimal asset allocation, it’s due to making poor risk decisions and/or excessive spending (and then taking big risks to keep the fun times rolling).

For example, one simple way that you can lose money even with the odds in your favor is poor bet sizing. The authors created the Elm Wealth Coin Flip Challenge in order to teach this interactively. In the game, the coin is altered such that you know it will come up heads 60% of the time, and tails 40% of the time. If you know anything about gambling in the real world, you’ll know this is a huge advantage! Dramatic movies about card counting and the MIT Blackjack team involves edges of only ~1%.

You get $25 to wager, and you can bet any amount you have. Can you build your stack up to thousands of dollars? Try for yourself, first with just your intuition. You’ll soon discover that it’s harder than it looks! Too little a bet, and the needle doesn’t really move much even on the good swings. Too big a bet, and you can’t survive the bad swings. It’s quite easy to dwindle quickly down to zero. After that, as Warren Buffett has stated, “Anything times zero is zero.”

Nowadays, we all have a 24/7 casino lurking in our pockets. With ads constantly telling us we can get rich with crypto, stock options, and sports betting, I think it’s very critical to teach ourselves and our kids about these concepts like odds and betting. Warren Buffett once bought and installed slot machines in his own house, to teach his kids about the one-armed bandits. Investing done right with proper risk management is a positive-sum game with excellent odds for the investor. Crypto speculation, aggressive use of stock options, and sport betting are only excellent for the “house” and I fear will create a generation of missing wealth. The next wave of volatility will come soon enough.

Filed Under: Investing, Tools & Calculators //

Social Security Optimizer by T. Rowe Price: New Free Retirement Income Tool

Posted on March 18, 2024 // 4 Comments

T. Rowe Price (TRP) announced a new free tool called Social Security Optimizer to help decide when to start claiming Social Security benefits. You enter information like age, marital status, life expectancy, spousal information, and “Monthly Benefit Amount At Full Retirement Age”. It will ask you to register with your email address, but it is otherwise free. (After you register, you also get access to other free TRP tools.)

The new tool, which provides tailored insights through analysis of an individual’s specific circumstances, estimates when to begin claiming Social Security and how much they should expect to receive. Social Security Optimizer can also model life expectancy to see what claiming strategies will yield the most amount of money over time based on the inputted life expectancy. Individuals are guided through a short series of questions. The tool will then estimate the optimal age to take Social Security, the optimal age for their partner to take Social Security, and the amount of benefit the individual (and their partner) will receive, given their assumed life expectancy. The Social Security Optimizer also pairs broader education and resources to help individual investors and plan participants make more informed decisions.

Based on my initial tests, the tool is on the basic side. They do recommend a specific claiming strategy and provide some useful background information about how Social Security works, but it doesn’t go into much detail about all of the possible scenarios. I was honestly hoping for something more full-featured given that in March 2023, T. Rowe Price announced that it was acquiring Retiree Inc., which included several advanced software tools for both individuals and professional financial advisors like SSAnalyzer.com, Income Solver®, and Social Security Solutions™.

I’d still recommend checking it out, as Social Security claim timing is a big decision and I think exploring and using all available information is a good idea. These tools can introduce a lot of people to ideas that they would have not otherwise considered, like perhaps having one spouse claim as early as possible (age 62), and then have the other claim as late as possible (age 70).

Other free third-party Social Security tools that I recommend trying out include Open Social Security and SSA.tools.

A reminder that this tool (and all the others) will help to maximize the total income that you receive from Social Security. Often this means one or both spouses delay their claim date to age 70. This works out fine if you have alternative sources of income while you delay your claim start date. However, if you need the Social Security income to retire sooner (often now), then that is a new variable to work in. Income that lets you retire and stop working today when you are younger and healthier may be worth more than what comes out of some discounted interest rate analysis.

I’ve also found there is often a behavioral psychology element. For example, if one spouse stops working first while the other continues to work, the non-working spouse may feel an urge to have their “own income” and want to start claiming Social Security as soon as possible.

Filed Under: Retirement, Tools & Calculators //

FI Calc: Visually-Friendly Retirement Withdrawal Calculator

Posted on August 31, 2023 // 1 Comment

If you enjoy tinkering with financial calculators, FI Calc is a new one that is visually easy to use and thus potentially more educational. The portfolio inputs are somewhat limited (“stocks” = S&P 500, “bonds” = 10-year US Treasuries) but I enjoy changing up the rest of the variables and seeing how that affects the results. You can support the creator here.

Here’s an example scenario using a 70% stocks/25% bonds/5% cash portfolio (rebalanced annually) along with a 4% withdrawal rate adjusted annually for inflation ($40,000 initially on a $1 million portfolio). The success rate for a 40-year withdrawal period (longer than the usual 30-years) was calculated to be 91.2% (“103 out of 113 retirement simulations were able to sustain withdrawals for the entire retirement.”)

If you scroll down, you can actually see which specific 40-year periods resulted in portfolio successes ✅ (including big successes 💰 ) and failures ❌ (and near failures 🥜).

If you click on the 1972-2012 box, you can see how the $1 million portfolio value would have gone down over time, running out of money in 2006.

Yet if you look at the average annual return over that 40-year time period, stocks earned 6.74% real (11.09% nominal) and bonds earned 4.20% real (8.55% nominal). The growth chart for the S&P 500 (shown below) looks great during that same time. It’s just that the “sequence of returns risk” popped up where the returns were low in the beginning of the period and high at the end. If you spend down your portfolio too much in the beginning, it doesn’t have enough money left to come back later.

This also why when people just assume stocks will go up 8% a year, it’s very different than a 8% guaranteed return. The volatility really hurts when you are spending down your assets.

But, when you lower it to a 3.5% withdrawal rate ($35,000 initially on $1 million), your portfolio was able to mount a comeback:

Filed Under: Retirement, Tools & Calculators //

Social Security Claiming Age: Theoretically Optimal vs. Real World Decisions

Posted on August 29, 2023 // 34 Comments

An important choice in retirement planning is when to start claiming your Social Security benefits. If you claim earlier, your monthly benefits will be reduced for the rest of your life. If you claim later, your monthly benefits will be increased for the rest of your life. Here is how much of the benefit taken at “full retirement age” will change based on your birth year. Taken from Fool.com using data from SSA.gov. Found via Early Retirement Forums.

This can be a complicated question, but if you were to force a rule of thumb*, it would probably be to wait to claim as late as you can in order to maximize your total lifetime benefits. (* Don’t just follow this blindly. There are many online calculators to help you with the details, especially for couples, like the free Open Social Security.)

Social Security is the only place you can “buy” a lifetime of guaranteed inflation-adjusted income. The difficulty is that you have to “buy” it by living off your other investments until your claim age.

Here are some interesting charts from the article The Retirement Solution Hiding in Plain Sight: How Much Retirees Would Gain by Improving Social Security Decisions, which analyzed the “actual Social Security decision and wealth accumulation of 2,024 households in a Social Security Administration sponsored panel survey.”

As you can see, the optimal claim age to maximize total lifetime benefits is mostly tilted towards the maximum age of 70. However, the actual claim age is heavily clustered towards the earliest possible age of 62.

How much difference are we talking about? Here is a chart showing of the average lifetime increase in income if you went for the optimal instead of the actual (in percentages).

Filed Under: Retirement, Tools & Calculators //

Alternative Ways To Track Savings I Bond Values (Tools and Calculators)

Posted on April 23, 2023 // 8 Comments

If you have accumulated some savings bonds but don’t really enjoy logging into TreasuryDirect.gov all the time, here are some alternative methods to tracking your balances over time. Each has its own strengths and weaknesses, and the unofficial ones are the results of motivated DIY investors. As an example, I will track a Savings I Bond purchased in April 2013 for $10,000.

Official TreasuryDirect Savings Bond Calculator

Although this official calculator states that it is only meant for paper savings bonds, you can still use it indirectly to track electronic savings bonds (they have the same value as long as they are issued the same month). For example, let’s say you bought $10,000 of I Bonds issued in April 2013. While you can’t enter a $10,000 value directly, you can enter two $5,000 I Bonds. (Enter anything for serial number.) Thus, you’d see that as of April 2023, they are worth $12,636.

You can even save your entire inventory of specific I bonds if you follow the directions here. It feels a bit archaic (you’re basically saving a plain text .html file), but it works. You can even import the values into Google Sheets, according to this Bogleheads forum post.

EyeBonds.info

Created by a user on the Bogleheads forums, this is a very handy and simple website that tracks the price of every savings bonds based on the issue date. For April 2013, simply click on that date and see the growth in value shown below. As of April 2023, you get the same $12,636 value and since the rate is known for the next 6 months as well, you can see the value all the way out to October 2023. This may lead to the easiest way to import the values into your own custom Google Sheet; check out Bogleheads forum post.

eWorkpaper I Bond Calculator

This site also allows you to look up the price history of savings bonds based on the issue date. For April 2013, there are the same ending values along with a chart comparing the value against CPI inflation. You can also quickly create a list of multiple savings bonds here, although it doesn’t appear to allow you to save it for later.

(I personally use these tools once in a while for research, but for tracking balances I simply log into TreasuryDirect.gov during my quarterly portfolio updates and manually enter the values into my Google Sheets page under the “Inflation-Protection Bonds” asset class. It’s only four times a year, and I like to log into the official retro website to make sure my money is still there.)

Filed Under: Banking, Savings Bonds, Tools & Calculators //

Better Future: Free Background Check Powered by Checkr

Posted on January 17, 2023 // 2 Comments

(Update 2023: Better Future suspended their free background checks during the pandemic, but I just noticed that they are back up and running, An inaccurate background check can prevent you from getting a job, so it is better to check now and start the process to dispute any incorrect information immediately.)

While updating my posts on free Consumer Data Reports, I noticed that Checkr offered a free background check via the BetterFuture.com website. No credit card required, no trials. Checkr is a legitimate company that provides background checks for Uber, Lyft, Postmates, and Instacart, so I valued their results more than most other “free lookup” sites.

The benefit of knowing what is on your background check is that you can fix any inaccuracies before applying for employment. In return, Checkr makes money by trying to connect you with relevant job opportunities based on your unique information.

Better Future takes your basic information (name, address, SSN) and pulls data from federal databases and public records from over 3,200 local counties. The sections of the background check report are:

  • Address History
  • SSN Trace
  • Sex Offender Search
  • Global Watchlist Search (International crime databases)
  • National Criminal Search
  • County Criminal Searches

I decided to run a free background check on myself, and it only took about an hour even though it said it might take up to 3 days. The information shown was all correct to my knowledge. Here’s a redacted screenshot of my report:

The background check does not include Employment History, Driving Records, or Civil Records. Here is the disclaimer that comes with the report:

This background check is for the named individual only. Better Future searched the sources listed below based on the information you provided. Failure to provide accurate or complete information may affect results. Third parties, such as potential employers, may search other databases for information about you. This is not a “consumer report” as defined by the Fair Credit Reporting Act (FCRA) and may not be used for determining any person’s eligibility for credit, insurance, employment, housing, or for any other purposes covered under the FCRA.

Bottom line. Checkr offers a free background check via BetterFuture.com. No credit cards, no trials. In return, they can match you up with job opportunities (optional). I signed up for a free report and I found no errors in the information.

Filed Under: Career, Deals & Offers, Tools & Calculators //

Treasury Bond vs. Bank CD Rates: Adjusting For State and Local Income Taxes

Posted on July 18, 2022 // 2 Comments

If you are an individual investor that usually buys bank certificates of deposit, right now you may want to compare against a US Treasury bond of similar maturity. Treasury bond rates are traded constantly, but this Vanguard brokered CD page can provide a rough idea if they are worth a closer look (even though their brokered CD may or may not be the best CD rate available). Again, this screenshot is already out of date:

Right now, they are pretty close for many maturity lengths. For example, let’s take a 1-year CD paying 3% APY and a 1-year Treasury bond paying 3%.

(Note: This may not be true by the time you read this. Here are the current Treasury bond rates. In the last two weeks alone, the 1-year Treasury has ranged from 2.79 to 3.21%. In 2022 alone, the low was 0.38%.)

An important consideration is that Treasury bonds are exempt from state and local taxes. This can make the Treasury bond significantly more attractive to some folks, even if the initial rate is the same. This assumes you are investing in a taxable account (not tax-sheltered). US Savings bonds are also exempt from state and local taxes.

For example, let’s say you are a single resident of California with a taxable income of $80,000 annually. Any easy way to compare the rates is by using a calculator like this Fidelity tax-equivalent yield calculator. Using the example income, it will find that your marginal tax rates are 22% Federal and 9.30% State (CA). I am assuming no local tax rates from your city or county.

What matters in the end is what you are left with after taxes. As such, the calculator supplies the following chart:

For this example person, a Treasury bond earning 3% will pay the same after-tax interest as a bank certificate of deposit paying 3.44%.

Here is a rough check on my part:

$10,000 * 3.44% * (1 – 0.22 – 0.093) = $236 in annual interest, after taxes

$10,000 * 3.00% * (1 – 0.22) = $234 in annual interest, after taxes

I suspect the minor difference has to do with the way that bond yields are quoted for Treasury bonds. This is also why the corporate bond yields are different from the CD yields even though they are subject to the same taxes.

Bond yields, except CDs, are assumed to be twice the semi-annual yield, as is the normal convention for quoting bond yields. CD yield is calculated as ((( corporate bond yield / 2) +1)² ) – 1

From the calculator fine print:

The calculator does not take into account:

– Reductions and limits on federal itemized deductions
– State and local taxes are not deducted from your federal tax rate. Depending on your personal situation, this may cause the resulting yield to be overstated.
– Federal alternative minimum tax (AMT)
– State alternative minimum tax
– Intangibles taxes levied by individual states
– Net Investment Income Tax
– Additional Medicare Tax

For practical purposes, I don’t sweat the minor differences. In order to actually buy many of these Treasury bonds at the time that you want and for the remaining maturity length that you want, you’ll have to buy them on the open secondary market. The available rates will change by the minute. Or, if you buy them as a new issue, you won’t know the rate at all as it is determined at auction. I mostly just want to know that the Treasury bond is preferable to a bank CD by an adequate margin. In this example, I would say that 0.44% higher annually is enough of a margin.

There are other wrinkles… if you don’t hold to maturity, Treasury bonds don’t offer the ability to withdraw early and only pay a preset interest penalty like a bank CD. You’d have to sell again on the open market, where you may lose (or gain) principal.

Armed with this information, you might create your own bond ladder using US Treasuries instead of a CD ladder. This is easy for an individual investor because you don’t need any skill to determine creditworthiness. Both US Treasury bonds and FDIC/NCUA-insured certificates of deposit are backed by the full faith and credit of the US government. (Municipal bonds don’t come with such a guarantee. Some municipalities are in better financial shape than others. I don’t buy individual municipal bonds for this reason.)

Filed Under: Banking, Investing, Tools & Calculators //

Big List of Social Security Tools: Best Time to Start Claiming Social Security Benefits?

Posted on February 9, 2022 // 2 Comments

Social Security is the largest source of retirement income for a majority of Americans. For about 1/3rd of them, Social Security makes up 90% or more of their retirement income.

ss_percent

Depending on your assumptions, the “lump sum value” of your Social Security benefits is somewhere between $300,000 and $700,000. (Source: Kitces)

Even this large figure ignores the fact that your Social Security income is guaranteed to rise each year with inflation, something no other private annuity company in the world even offers any longer at any price!

Therefore, spending a little time and money in order to consider the many options for Social Security (especially for those married, divorced, widowed, or disabled) can really make a difference. This NYT article (free, gift article) lists a number of services that help you navigate the rules (at a variety of service levels and price points). In no particular order:

I don’t have any in-depth experience with any of these online tools, but when the time comes I’d probably pony up the money (adds up to less than $100 for all three) and compare the results. If they are properly programmed, they should all agree, right?

The tools below go beyond Social Security claiming strategies and more into overall retirement income planning.

Even if you’re still far away from claiming time, be sure to sign up for your official mySocialSecurity account (before a scammer does) and take a peek at your stats each year. For those that like tinkering, try copy and pasting your anonymous data into the SSA.tools website (free) and play around with different future scenarios.

In the end, you may not follow the software recommendations exactly, but simply knowing about the different options and factors can be helpful. In my experience, many people just end up claiming earlier because they want “their” money sooner rather than later without understanding the potential drawbacks. A retiree may want to have their “own” paycheck again if their partner still works.

Filed Under: Investing, Retirement, Tools & Calculators //

Real-World Smoothing Effects of Regular Investments (Dollar Cost Averaging)

Posted on August 19, 2021 // 7 Comments

Most people must rely on the power of smaller, regular investments from work income to build up their retirement nest egg. In the latest Sound Investing email, Paul Merriman shared a new Lifetime Investment Calculator that helps you see how these gradual investments (dollar-cost averaging) would have added up during various periods, using actual historical returns from 1970 to 2020.

I’ve already tried to illustrate how regular investments of $250 or $500 a month can add up over time. But instead of having to manually gather performance numbers from a Vanguard Target Retirement fund in a spreadsheet, this fancier calculator lets you adjust many more variables. You can choose different asset allocations, stock/bond ratio, investment amounts, and so on. Importantly, the calculator uses actual historical returns, so you can see what would happen if you invested through the 2001 dot-com bust, 2008 financial crisis, and so on.

You can start the sequence of returns from any of the 51 years to replicate your financial picture as if your decisions were available in the past. For example, you could simulate the role of luck by starting or ending your journey in a bull or bear market. It is not a financial planning calculator per se, nor meant to be a complete planning tool, but it allows you to customize both growth (accumulation) and distribution phases based on your personal timeline and investments.

If you aren’t familiar with Paul Merriman, he is an advocate of adding a bit of complexity to index fund portfolios via additional exposure to smaller and value-oriented companies. For a test run, I went for the “Ultimate Buy and Hold Worldwide (70% US/30% International)” portfolio, alongside a simple S&P 500 portfolio.

Here is $10,000 invested every year for 15 years, with small ~3% increases each year with inflation (ideally corresponding with a higher paycheck), starting in 2005:

Here is $10,000 invested every year for 15 years, with small ~3% increases each year with inflation (ideally corresponding with a higher paycheck), starting in 2000:

Here is $10,000 invested every year for 15 years, with small ~3% increases each year with inflation (ideally corresponding with a higher paycheck), starting in 1995:

You can see that an internationally-diversified portfolio may not be the best in some periods, but it also may not be the worst in others. (I admit I am a bit confused as to why the performance numbers for any given year are slightly different for each test run, perhaps someone out there can explain that to me.)

Even in the 1995-2010 period that contained both the 2001 dot-com bust and the 2008 financial crisis, your ending balance would still have ended up much higher than your total contributions with the internationally-diversified portfolio.

Filed Under: Investing, Retirement, Tools & Calculators //

Schwab Plan Review: Free DIY Financial Planning Software

Posted on August 27, 2020 // 6 Comments

Schwab has rolled out a new digital financial planning tool called Schwab Plan. They claim it to be a simplified version of the same financial planning software used by many human financial advisors. From their press release:

Schwab Plan is a digital self-guided financial plan available through Schwab.com that helps investors build a personalized plan that includes a range of factors such as desired retirement age, retirement goals, social security expectations, portfolio risk profile and asset allocation, and various income sources.

[…] they are able to generate a retirement plan that shows retirement goals and probability of funding those goals, a comparison of an individual’s current asset allocation to a recommended allocation based on plan inputs, and suggested next steps to get and stay on track.

Access to this tool is free to anyone with any type of Schwab account. (Eventually, this should include TD Ameritrade clients as well.) There is no minimum asset requirement and you don’t need to sign up for a new service. For example, I was able to access it with only a Schwab PCRA brokerage window account. Here are a few initial impressions and screenshots after testing it out.

First, you enter some basic personal information like current age, gender, retirement age, and life expectancy:

Next, you estimate your income needs in retirement. They offer additional assistance in estimated your health insurance costs in retirement. You then enter your assets and income sources. Your Schwab accounts are automatically imported, and you can manually add the raw balances of additional external accounts (no account aggregation). They use your information to estimate your Social Security income, and also ask about stock options and restricted stock units.

(They don’t ask about children, college savings, term life insurance, disability insurance, or any of those smaller details that a full-service advisor would ask about. There is also very little customization available in terms of recognizing your external asset allocations.)

Once everything is entered, they run a Monte Carlo simulation to estimate your probability of success.

You can then adjust the variables, such your retirement age and future spending, in order to see how it affects your success rate. I found the analysis to be reasonably consistent with my other research, and I liked that the results changed significantly for an early retirement (45 year period) as opposed to a traditional retirement (30 year period). They use a “confidence zone” system:

(The Monte Carlo simulations above does not equate to an 86% confidence level. This was after making some tweaks to improve the results.)

Bottom line. Schwab has added a free financial planning tool for all of their customers (no minimum asset requirement). After testing it out, it is not quite “professional-grade”, but I did find it to be slightly more advanced than most other free options. I would recommend trying it out if you have any type of Schwab account. Of course, it also provides a pathway to upgrade to their other portfolio management services, and I still have concerns about their Intelligent Portfolios product.

Filed Under: Deals & Offers, Investing, Retirement, Tools & Calculators //

Money in Excel Review – Good For Budget Tracking, Bad For Investments

Posted on July 19, 2020 // 12 Comments

Thanks to generous assistance from a reader, I was able to spend some time poking around the new Money in Excel template for Microsoft 365 Personal or Family subscribers. Does it fulfill its promise of helping you “see all your financial accounts in one place, make a plan, and reach your financial goals”? Here’s my rundown of the features that were included and those that were missed.

Accounts Toolbar. After following the clear installation instructions, you can add your various financial accounts using the toolbar on the right-hand side. (I just connected a few secondary accounts for review purposes.) Plaid is used for account aggregation, where you provide your login and passwords and they use that to grab your account balances and transaction history. This data import feeds the rest of the Excel worksheet, but the panel itself is a useful at-a-glance snapshot of your finances. The feel is very similar to the “Overview” page on the Intuit Mint app.

Customized Categories. In the “Categories” worksheet, you can create and edit the names of custom categories used to organize your transactions. For example, I added “Charitable Giving”. You can’t edit the original, default categories.

Transactions. You then move onto the “Transactions” worksheet, where you can edit the categories assigned to each specific imported transaction. If you have a lot of transactions across different bank and credit card accounts, this provides a handy aggregate view of everything together.

Spending analysis. For the most part, this template is about budgeting and spending. Once have all your transactions imported and categories, it will generate some basic charts and provide some simple insights into your expenses. Here are some examples:

  • Spending breakdown by category
  • Current vs. previous month spending
  • Cumulative spending over the month
  • Net worth calculation (assets minus liabilities)
  • Top merchant: Where did you spend the most money?
  • Bank fees: How much are you paying in fees?
  • Subscriptions: Where are your recurring expenses?

This is all useful for someone trying to understand their spending and developing their own budgeting system, but it’s definitely not groundbreaking. Mint.com has providing this type of service for many years. The main differences are that there are no pesky advertisements inside your own Excel worksheet, while the Mint smartphone app may be more convenient.

Missing: Holdings, asset allocation, performance tracking. I am able to connect to an investment account, but it only shows me the total dollar balance. That’s it, as far as I can tell. There is no data on individual holdings, no asset allocation breakdown, no performance tracking.

Missing: Investment transaction list. I am not able to see historical buy/sell transactions on a simple view-only basis, like on the credit card side. It would be nice just to see the last 10 transactions, for example.

There are other portfolio spreadsheets where you can manually input ticker symbols and share counts and they’ll pull in market quotes, but that doesn’t adjust for events like dividends, stock splits, and dividend reinvestment. I was hoping to create a single portfolio spreadsheet using the imported data cells from my brokerage accounts, one that would provide a live view of all my investment accounts, but also allow me to manipulate those data in order to determine if/when to rebalance my portfolio.

For now, I will have to stick with my existing system using both Personal Capital and a custom Google Spreadsheet to track my investment holdings. The Personal Capital financial tracking app (free, my review) automatically logs into my accounts, adds up my balances, tracks my performance, and calculates my asset allocation. Then, I use my manual Google Spreadsheet (free, instructions) to help me calculate how much I need in each asset class to rebalance back towards my target asset allocation.

Bottom line. The “Money in Excel” template for Microsoft 365 Family and Personal subscribers is a free, basic template that imports your spending transactions across different bank and credit card accounts. It can help you with monthly budgeting, but not much beyond that. I hope that in the future they expand it to investment accounts and allow you to have more control over your data. It would also be nice if they made it free for everyone with access to Excel, not just Microsoft 365 Family and Personal subscribers.

Filed Under: Budgeting, Tools & Calculators //

Free Social Security Tool for Optimal Benefit Claiming Strategy

Posted on July 9, 2020 // 5 Comments

Update: The free Open Social Security tool has been updated to include a new “heat map” visualization that illustrates the relative values of claiming Social Security at different ages. Details here. Here is a sample graph for a couple with similar income histories and the same age:

For this situation, we see that the worst expected outcomes would occur if both individuals claimed really early. The best expected outcomes occur when one claims relatively early and the other claims relatively late.

Original post:

socialsecuritycardWhen to start claiming Social Security to maximize your potential benefit can be a complicated question, especially for couples. There are multiple paid services that will run the numbers for you, including Social Security Solutions (aka SS Analyzer) and Maximize My Social Security, which cost between $20 and $250 depending on included features.

Mike Piper of Oblivious Investor has created a free, open-source calculator called Open Social Security. To use the calculator, you will need to your Primary Insurance Amount (PIA). This amount depends on your future income, so I would first consult this other free Social Security benefit estimator tool to more easily estimate your PIA. I believe the value you see at SSA.gov assumes that you will keep working at your historical average income until your claiming age (which won’t be the case for us).

Here are our results as a couple, assuming we were the same age (we are close) and with my expected benefit being slightly higher than hers:

The strategy that maximizes the total dollars you can be expected to spend over your lifetimes is as follows:

You file for your retirement benefit to begin 12/2047, at age 70 and 0 months.
Your spouse files for his/her retirement benefit to begin 4/2040, at age 62 and 4 months.

The present value of this proposed solution would be $657,749.

Basically, the tool says that my wife should apply as soon as possible, while I should claim as late as possible. I believe this is because this scenario allows us claim at least some income starting from 62, and if I die first after that, my wife would still be able to “upgrade” to my higher benefit.

The tool might take some time to run the calculations, depending on your browser. You can learn more and provide feedback at Bogleheads and Github.

I am not a Social Security expert, and am not qualified to speak to the accuracy of the results. However, Mr. Piper is the author of the highly-rated book Social Security Made Simple, has a history of doing thorough work, and the tool has been around a while now. If I were close to 62, I would probably also use the paid services for a second and third opinion. Why? Spending $100 now could save you many thousands in the future.

The best thing about this free tool is that it can introduce a lot of people to ideas that they would have not otherwise considered. Even if it lacks every bell or whistle, being free means it can help more people. Many spouses wouldn’t think of having one claim as early as possible (age 62), and then have the other claim as late as possible (age 70). It’s not common sense unless you understand the inner workings of Social Security.

Filed Under: Deals & Offers, Retirement, Tools & Calculators //
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