T Rowe Price recently rolled out a new Social Security benefit calculator. Unfortunately, their calculator is not ready for prime time. In fact, in its current state, it is not ready for any time. It gives incomplete and misleading advice that, if followed, could cost some married couples $100,000 or more.
I will illustrate some of the problems with the T. Rowe Price (TRP) Social Security calculator with data for a hypothetical married couple, John and Mary. I assume John and Mary were born in 1952 and 1954, respectively. John’s life expectancy is 83; Mary’s is 95. John’s Social Security benefit at his full retirement age (FRA) is $2000 a month, while Mary’s is $100 a month.
For this example, I selected the following as this couple’s goal: “We want to maximize the survivor benefit and also receive income early, if possible.” (The TRP calculator allows a user to select among several goals.)
Here is the set of recommendations from the T. Rowe Price calculator:
- Mary claims retirement benefits at 62, receiving approximately $900 per year.
- When John turns 66, he files a restricted application for spousal benefits, receiving approximately $600 per year.
- When John turns 70, he claims his own retirement benefits, receiving approximately $31,680 per year.
And that’s it.
Do you see a problem here–a really big problem?
The T. Rowe Price Social Security calculator has failed to include a recommendation that Mary should claim a spousal supplement as soon as John turns 70. At that point, she could pick up an extra $10,800 a year in spousal benefits. These spousal benefits would continue until John’s expected death at age 83, implying that the T. Rowe Price Social Security calculator has mislaid about $140,000 in this case!
That’s an amazing–really, inexcusable–oversight.
For this second example, I assume that Mary’s retirement benefit at her FRA is $900 per month. Other personal characteristics remain unchanged.
For the couple’s goal, I assume that John plans to retire at age 66 and that Mary plans to retire at 70.
Here is what the TRP calculator recommends:
- John should file for his retirement benefits at age 66, receiving approximately $24,000 per year.
- Mary should file for her retirement benefits at age 70, receiving approximately $14,256 per year.
Again, that’s it.
And, again, I ask: do you see a really big problem here?
The TRP calculator fails to mention that Mary can claim spousal benefits at age 66, using a restricted application and letting her retirement benefits grow until age 70. These spousal benefits would equal $12,000 a year, or $48,000 between age 66 and 70 Mary.
I have not yet thoroughly investigated the TRP calculator. But, from what I have seen, it is easy to conclude that this calculator is seriously broken.
For an example of a calculator that actually works, go here.