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Married Couple

SSCalc.net Input OptionsSSCalc.net NPV Chart
This case is a married couple with an older worker and a younger spouse with a significant work history. The spouse plans to have a small business or work part-time for $25,000 annual income at age 62 that will last for 15 years. The worker has an annual pension of $7,500 that is adjusted for inflation that begins at age 62. They assume $50,000 per year of living expenses which the calculator automatically adjusts for future inflation. They assume a 3% draw from their investment accounts to help meet their expenses. They elect to assume relatively high effective tax rates for the future.

The above chart graphs 3 retirement income streams generated by this couple: the high, low and median accumulated Real Dollar value at age 100. Option 62/62 offers the lowest value at $877,000 at age 100. Option 70/70 offers the highest value at $1,493,000. The break-even, or cross-over, age at which both options offer equivalent NPV is about 88 (age of the older spouse).

The chart below shows the retirement options in accumulated Net Present Value terms.
SSCalc.net Real Dollar Chart
Option 70/70: The data in the report directly below represents the green line in the above charts. Both you and your spouse choose to delay taking your benefits until age 70. This option illustrates the case where you, at FRA, can apply for benefits and then suspend payments up to age 70. This allows your spouse to start receiving a spousal benefit. Your benefits start at age 70 ($2,800 x 9 months = $25,200). Your spouse starts the spousal benefit at his/her FRA of 66. Their starting benefit ($4,804) is 4 months of income (given the August birthday) and is equal to 50% of your FRA benefit at 66 (remember, at $2,000 per month) adjusted for 6 years of COLA. The spouse benefit factor is 50% because your spouse waited until FRA to start benefits. At age 70, your spouse begins taking the benefit based on their work history ($1,600 x 12 months = $19,200), since it is greater than the spousal benefit.

A portion of your Social Security benefits can be subject to taxation, it depends on your level of income from other sources including investments. Note that in 2031 your benefit subject to tax fell dramatically the year after your spouse's side income ended.

Wage income started at age 62 for the spouse and continued for 15 years adjusted for inflation. Other Income is a combined input so it starts at age 62 of the oldest. This income was also adjusted for inflation.

In 2010, the Investment Account Draw/CF Gain column ($19,125) is equal to 9 months of a 3% draw from the $850,000 total in the Investment Accounts. In subsequent years this column also includes a 4% gain on the excess cash flow remaining from the prior year.

Notice that in the first year the Investment Account draw of 3% was not enough to cover expenses and taxes leaving you with a -$18,000 cash flow balance. The calculator will then draw down the Investment Accounts further to cover this balance resulting in a $0 balance in the Accumulated Real Cash Flow column.

This results in a 2010 Total Investment Account balance ($838,375) which is equal to 9 months of a 1% net gain (4% investment gain minus 3% draw) minus the -$18,000 cash flow shortfall.

Retirement Option Report
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