The Covisum Social Security Calculator is a powerful tool designed to help you optimize your Social Security claiming strategies. Covisum, a financial technology company, provides tools that assist in understanding the best time to start claiming Social Security benefits to maximize your lifetime benefits. This article will explain how the Covisum Social Security Calculator works, its purpose, and provide step-by-step examples to help you make informed decisions about your retirement.
Understanding the Calculator’s Purpose and Functionality
The Covisum Social Security Calculator helps you determine the optimal time to claim Social Security benefits. When to claim Social Security can significantly impact the total amount you receive during retirement. Factors such as life expectancy, marital status, financial needs, and other sources of retirement income all play a role in this decision.
Inputs:
- Birthdate: Determines your age, which is crucial for calculating Social Security benefits as they vary by age.
- Retirement Age: Age at which you plan to retire and possibly start claiming Social Security benefits.
- Monthly Benefit at Full Retirement Age (FRA): The amount you are expected to receive if you start claiming benefits at your FRA, which varies depending on your birth year.
- Marital Status: Determines if spousal benefits apply.
- Spouse’s Birthdate and Benefits: If married, these factors will affect your claiming strategy, particularly if you are eligible for spousal benefits.
- Life Expectancy: An estimate of how long you expect to live impacts the total benefit amount you could collect over your lifetime.
Key Calculations:
- Adjustment for Early or Delayed Retirement:
- Reduction for Early Claiming: If you claim benefits before reaching FRA, your monthly benefit reduces by a certain percentage for each month you claim early.
- Increase for Delayed Claiming: If you delay claiming past your FRA, your monthly benefit increases by a certain percentage up to age 70.
- Break-Even Analysis:This involves calculating at what age the total benefits received become greater under one claiming strategy compared to another.
- Total Lifetime Benefits Calculation:Sum up all benefits from the start of claiming until the life expectancy age to compare different strategies.
Example:
Suppose your FRA is 67 (for those born after 1960), and your monthly benefit at FRA is $2,000. If you claim at 62, your benefits reduce by about 30%, giving you $1,400 per month. If you delay until 70, your benefits increase by 24% (8% per year for three years), giving you approximately $2,480 per month.
Calculation for Early Claiming at 62:
- Monthly Payment: Monthly Payment=Monthly Benefit at FRA×(1−Reduction Percentage)\text{Monthly Payment} = \text{Monthly Benefit at FRA} \times (1 – \text{Reduction Percentage})Monthly Payment=Monthly Benefit at FRA×(1−Reduction Percentage) Monthly Payment=2000×(1−0.30)=$1,400\text{Monthly Payment} = 2000 \times (1 – 0.30) = \$1,400Monthly Payment=2000×(1−0.30)=$1,400
- Total Benefits by Age 85: Total Benefits=Monthly Payment×12×(Age 85−Claiming Age)\text{Total Benefits} = \text{Monthly Payment} \times 12 \times (\text{Age 85} – \text{Claiming Age})Total Benefits=Monthly Payment×12×(Age 85−Claiming Age) Total Benefits=1400×12×(85−62)=$386,400\text{Total Benefits} = 1400 \times 12 \times (85 – 62) = \$386,400Total Benefits=1400×12×(85−62)=$386,400
Calculation for Delayed Claiming until 70:
- Monthly Payment: Monthly Payment=Monthly Benefit at FRA×(1+Delay Increase Percentage)\text{Monthly Payment} = \text{Monthly Benefit at FRA} \times (1 + \text{Delay Increase Percentage})Monthly Payment=Monthly Benefit at FRA×(1+Delay Increase Percentage) Monthly Payment=2000×(1+0.24)=$2,480\text{Monthly Payment} = 2000 \times (1 + 0.24) = \$2,480Monthly Payment=2000×(1+0.24)=$2,480
- Total Benefits by Age 85: Total Benefits=Monthly Payment×12×(Age 85−Claiming Age)\text{Total Benefits} = \text{Monthly Payment} \times 12 \times (\text{Age 85} – \text{Claiming Age})Total Benefits=Monthly Payment×12×(Age 85−Claiming Age) Total Benefits=2480×12×(85−70)=$446,400\text{Total Benefits} = 2480 \times 12 \times (85 – 70) = \$446,400Total Benefits=2480×12×(85−70)=$446,400
Relevant Information Table
Component | Early Claiming (Age 62) | Delayed Claiming (Age 70) |
---|---|---|
Monthly Benefit | $1,400 | $2,480 |
Total Benefits by Age 85 | $386,400 | $446,400 |
Conclusion: Benefits and Applications of the Calculator
The Covisum Social Security Calculator is an invaluable tool for anyone planning their retirement. It helps you understand the financial impact of different Social Security claiming strategies by calculating your monthly payments, total benefits, and total interest paid. By providing a clear picture of your retirement benefits, the calculator enables you to make informed decisions that can maximize your lifetime benefits. Whether you’re planning for yourself or with a spouse, this calculator can help you secure a more comfortable and financially stable retirement.