Lifetime Planner IDEA: Automate and Optimize Social Security Filing Dates in LTP

Scooterlam SuperUser, Windows Beta Beta
Lifetime Planner IDEA:   Add Feature to Automate and Optimize Social Security Filing Dates in LTP


Add feature to automate and optimize Social Security filing dates to maximize LTP end-of-plan balance.  Incorporate optional, user-entered constraints in the  optimization process such as minimum yearly cashflow balance, minimum end-of-plan balance and/or minimum account-type (taxable) balance.

For example:   Calculate and maximize, for all permutations of SS filing dates for singles or couples age 62 to 70, LTP end-of-plan-balance while ensuring a minimum: yearly cashflow balance of $ xxxx,   end-of-plan balance of $ yyyy and/or a yearly taxable account balance of $ zzzz.

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What is the right filing age for me?  This is a common question that arises for everyone when planning for Social Security.   The question is left to the user to apply whatever they they know, think they know, whatever rules of thumb they've heard, or whatever internet advice they've researched in order to make these important LTP assumptions.   

Currently, LTP "retirement assumptions" dialog allows the user to input Social Security benefits associated with a specific retirement date.   These assumptions are then adjusted by program rules for spousal and survival benefits, and retirement earnings tests and applied in the year-over-year cash flow model.

The user, once they enter their benefit(s) and associated filing year, can then play "what-if" scenarios in LTP against any or all of the possible SS filing date/amount permutations - manually.   Given 2 spouses and 9 possible retirement years for each spouse (to include both early and late filing dates, 62 to 70),  there are a lot of possible scenarios!  9?  72?  or more?  Regardless, there are far too many to "hand calculate".   It is a tedious exercise, prone to data entry errors and filing reduction/credit calculation errors,  to find that optimal filing combination.  For sure, the new SSA benefits statement now provides this yearly benefit data rather than the 3 ages given in past years.  So this should help reduce errors in applying reduction/credit factors for early/late retirement.    But still....

I note that Quicken once had a partnership with a 3rd party SS benefits software company that provided a fee-based, stand-alone SS benefits analysis.    This offering has since been removed.  


So, why not simply use any online SS benefits optimizer, free or paid, to find that "best" combination that maximizes SS lifetime value and plug those numbers into LTP?   Because these online calculators "exist in a vacuum" and take none of your LTP plan into account when determining what is  "optimal".  Sure it might be a good starting point and perhaps ultimately, "good enough",  but how will you know?  Change the (LTP) plan and change what is an optimal filing strategy for your situation?

For example, one could optimize filing dates for maximum lifetime value, using these online calculators, plug them into LTP and find that cashflows midway through the plan are concerningly low because you are foregoing SS income til later (but the plan still succeeds).  Image 1.  All good right?  Perhaps by using these "optimal" filing dates, LTP drains taxable accounts too quickly resulting in increased tax expenses (and possible penalties) from withdrawals from tax advantaged accounts?  Or perhaps, after a change in the plan due to college, wedding or other large special expenses, those "optimal" filing dates are no longer "optimal"?  The scenarios are endless and very specific to you and your changing situation.

With this feature, LTP can optimize your Social Security filing dates to provide the best possible end-of-plan balance while improving mid-plan cashflows and taxable account balances.   That is, this feature considers more than just isolating and maximizing the Social Security lifetime benefit.   Image 2.

IMAGE 1 - Later Filing of SS Benefits and Impacts on Parts of Overall Plan

IMAGE 2 - Earlier Filing of SS Benefits and Impacts on Parts of Overall Plan


1.  Add an optional feature to automate optimal Social Security filing date(s), factoring in existing LTP plan assumptions and program rules.   Retain the option to use existing SS benefit functionality.   Build, buy or license existing tools (to avoid out of date feature assumptions).  Image 3.

2.   Incorporate user-entered constraint assumptions in optimization process such as minimum yearly cashflow balance, minimum end-of-plan balance,  or minimum account-type (taxable) balance.  Illustrated in Images 1 and 2.

3.   Implement routines to handle and report on plan optimization failures when user constraints are too restrictive.

4.   Include SS benefits optimization feature in BOTH Retirement Assumptions dialog and What-if tool.

5.   Ensure that Spousal Benefit, Survivor Benefit and Retirement Earnings Test are up to date and faithfully models SSA rules.

6.  To avoid confusion and errors, replace current "Annual benefit" assumption with Primary Insurance Amount (PIA).  PIA is the value of SS benefit at FRA.   Allow program to adjust early or late retirement benefit values based on Full Retirement Age (FRA) of the users.

7.   Create graphs and charts to illustrate, side-by-side before and after results of SS benefits optimization feature.

8.   Maintain and update feature based upon SSA or IRA changes.

9.   Coordinate feature change with other related roadmap features.

10. Document and maintain feature description, assumptions and "how it works" in HELP.

11. Communicate this change in LTP through release notes.

Image 3 - Retirement Assumptions Auto Optimize Feature.

Please consider voting for this IDEA, below!

See and Vote on additional Lifetime Planner Enhancements HERE
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