Confused about future and present value for pension & social security in Lifetime Planner

leishirsute
leishirsute Member ✭✭✭✭
I noticed some confusing behavior that I just may be misunderstanding about the Lifetime Planner

For a fixed annual pension, today's value decreases the value of the pension throughout the years even though it is a fixed annual amount.  Future value of the pension keeps the same (actual) annual value of pension throughout the years.
For a fixed social security income after age 70, today's value keeps the same income for throughout the years.   Future value of the social security income increases the income every year after age 70.

Why do these 2 types of income behave differently for today and future values?
My expectation are for both fixed pension and fixed social security income to have fixed today's actual values throughout the years and to behave similarly in today and future value changes.

Am I understanding this incorrectly?
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Best Answer

  • Scooterlam
    Scooterlam SuperUser, Windows Beta Beta
    edited August 8 Answer ✓
    ...It seems that LTP continues to compute COLA for social security after age 70.  There should be none after age 70.

    After age 70, you will no longer receive additional monthly increases in the benefit amount you are entitled to, based on your earnings record.  You will receive COLA adjustments on your SS benefit amount after 70.  They are two different things.    

    Your benefit amount, determined in LTP>Assumptions>Retirement Benefits, is input by you (filing age and amount).  Yes, this is a fixed amount for the rest of your plan horizon but it continues (correctly) to be adjusted by LTP's COLA assumption, as described previously. 

Answers

  • Scooterlam
    Scooterlam SuperUser, Windows Beta Beta
    From your description, I am guessing that your Pension COLA setting is set to "no increases" or some number less than your inflation rate setting.  See image.  If so, when the plan result graph is set to "todays value", you will see decreasing pension income as result of inflation (as shown in the plan result tables).


    In terms of the Social security benefit,  LTP assumes that there is a COLA equal to your inflation rate setting.  So, that is why, when your plan result is set to "todays value", you see a constant income (in the plan result tables). 


  • leishirsute
    leishirsute Member ✭✭✭✭
    edited August 8
    Ah,  yes COLA has no increases in the pension. It seems that LTP continues to compute COLA for social security after age 70.  There should be none after age 70.
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  • Boatnmaniac
    Boatnmaniac SuperUser ✭✭✭✭✭
    Ah,  yes COLA has no increases in the pension. It seems that LTP continues to compute COLA for social security after age 70.  There should be none after age 70.
    Why should LTP stop adding in SS COLAs after age 70?  There will be SS COLA adjustments for just about every year for as long as we draw SS benefits.  (Assuming of course that the SS law does not remove COLAs.)  Why should LTP not account for that?
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  • Scooterlam
    Scooterlam SuperUser, Windows Beta Beta
    edited August 8 Answer ✓
    ...It seems that LTP continues to compute COLA for social security after age 70.  There should be none after age 70.

    After age 70, you will no longer receive additional monthly increases in the benefit amount you are entitled to, based on your earnings record.  You will receive COLA adjustments on your SS benefit amount after 70.  They are two different things.    

    Your benefit amount, determined in LTP>Assumptions>Retirement Benefits, is input by you (filing age and amount).  Yes, this is a fixed amount for the rest of your plan horizon but it continues (correctly) to be adjusted by LTP's COLA assumption, as described previously. 
  • leishirsute
    leishirsute Member ✭✭✭✭
    edited August 8
    Okay.  I am confusing COLA with the payout amount for delaying payments until age 70.  It just seems the projected SS income in the planner is far-fetched $49736 in 2024 and $73622 in 2034.  It would be nice but seems somewhat unbelievable.


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  • Chris_QPW
    Chris_QPW Member ✭✭✭✭
    @leishirsute
    You are definitely confusing two different things.

    BTW it isn't a "monthly" increase for delaying taking social security after your full retirement age.
    This one surprised me when my brother told me about it.

    Before your full retirement age, every month you delay the amount you get goes up.  But once you hit full retirement it will only increase at the start of the year.  So, say you hit full retirement this year.  You will get the same amount per month if you decided to take it in January next year or if you take in December.
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  • leishirsute
    leishirsute Member ✭✭✭✭
    edited August 8
    @Scooterlam Are Quicken LTP COLA assumptions described anywhere?

    Nevermind,  you already provided that info.
    "In terms of the Social security benefit,  LTP assumes that there is a COLA equal to your inflation rate setting. "
    Thanks.

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  • Boatnmaniac
    Boatnmaniac SuperUser ✭✭✭✭✭
    edited August 8
    (Deleted comment...it was redundant with what has already been posted here.)
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  • Scooterlam
    Scooterlam SuperUser, Windows Beta Beta
    @Scooterlam Are Quicken LTP COLA assumptions described anywhere?

    Nevermind,  you already provided that info.
    "In terms of the Social security benefit,  LTP assumes that there is a COLA equal to your inflation rate setting. "
    Thanks.

    Here is the link to a Quicken help topic:  https://help.quicken.com/pages/viewpage.action?pageId=3216781

    Using your present and future value figures, I'm guessing you've set your inflation rate at 4%.
  • Chris_QPW
    Chris_QPW Member ✭✭✭✭
    Note there is more information on what it is doing in the help, for instance if you had a government pension or if you selected to reduce the amount.
    If you select How Do I? here it will get you in the general area, then just look for Social Security:

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  • Boatnmaniac
    Boatnmaniac SuperUser ✭✭✭✭✭
    edited August 8
    Chris_QPW said:
    @leishirsute
    You are definitely confusing two different things.

    BTW it isn't a "monthly" increase for delaying taking social security after your full retirement age.
    This one surprised me when my brother told me about it.

    Before your full retirement age, every month you delay the amount you get goes up.  But once you hit full retirement it will only increase at the start of the year.  So, say you hit full retirement this year.  You will get the same amount per month if you decided to take it in January next year or if you take in December.
    You might want to read this: https://www.ssa.gov/benefits/retirement/planner/delayret.html.  The amount of the SS benefit increases by a certain percentage for every month you delay retirement until you reach age 70, including for the months after you reach your FRA.   I went through the planning on this with the SSA for both my brother and for me.  They printed out a spreadsheet for me showing what the monthly benefit amounts were for each month of delay right up to age 70.  (You can also scroll down in that SSA article to where you can enter your birth year and then click on "Change".  That will take you to another page showing the monthly benefits change for each month up through age 70.)
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  • Chris_QPW
    Chris_QPW Member ✭✭✭✭
    @Boatnmaniac that is what surprised me.  It is computed that way, but not "paid" that way.

    If you use the standalone Social Security calculator it shows this.

    Here is at my full retirement age 66 1/2 (I used "maxed out benefits contributions" just for an example.)


    Now one month later:


    Now jump to the next year:


    Now go one month more:


    And just to make sure it doesn't work that way before full retirement age, this is one month before my full retirement age:

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  • Chris_QPW
    Chris_QPW Member ✭✭✭✭
    BTW my brother is 4 years older than I am which makes his full retirement age 66, and he didn't take social security until this year which is after his full retirement, so he saw this happening "real time".
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  • leishirsute
    leishirsute Member ✭✭✭✭
    edited August 8
    and the info at https://www.ssa.gov/oact/cola/colaseries.html and, with everyone's explanation here, realized I was confusing the two types of increase.

    Thanks


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  • Boatnmaniac
    Boatnmaniac SuperUser ✭✭✭✭✭
    edited August 8
    Chris_QPW said:
    @Boatnmaniac that is what surprised me.  It is computed that way, but not "paid" that way.

    If you use the standalone Social Security calculator it shows this.

    Here is at my full retirement age 66 1/2 (I used "maxed out benefits contributions" just for an example.)


    Now one month later:


    Now jump to the next year:


    Now go one month more:


    And just to make sure it doesn't work that way before full retirement age, this is one month before my full retirement age:

    Hmmm....that's weird.  I just looked at the online schedule for my wife's SSA.gov account (she's not retired, yet) and it returned some really weird results:  For FRA and the next 3 months the benefit was the same.  For months 5-11 it increased to another consistent value.  For the first 3 months of the next year it was another consistent increased value and then it was another increased value for the next 8 months.  The first 6 months of the following year it showed an increased consistent value but then in month 7 it showed a decrease.  Huh?  I stopped reviewing it after that because something sure seems amiss with their online calculator.
    All I know is when my brother and I met with the SSA agent he showed us the report from the calculator they use and it had increasing values for each and every month through the 1st month of our 70th years which correlates with what is said in the SSA article.
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  • Chris_QPW
    Chris_QPW Member ✭✭✭✭
    Maybe it is just the calculators that are messed up.  I don't know.
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