Much has been said about delaying Social Security benefits. Should you delay or opt to claim benefits immediately? As in most financial planning, it depends. This week’s digest highlights articles that explain the trade-offs of claiming Social Security benefits under different scenarios.
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Social Security: Delay Benefits at the Expense of Personal Savings? |
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By Marty Allenbaugh
With the exception of only the top income quintile, Social Security is the largest source of retirement income for Americans. While many retirees also heavily rely on their investments to provide income, they face a challenge in balancing their personal savings against Social Security benefits. In the article Social Security: Delay Benefits at the Expense of Personal Savings?, author Marty Allenbaugh examines a T. Rowe Price study on the trade-offs involved with taking Social Security benefits depending on retirees’ marital status.
Some of the topics covered in the article include:
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How trade-offs change for single vs. married retirees
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Different strategies that married couples can implement in retirement
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How the “split” strategy may provide a way for married couples to reduce their savings withdrawals before age 70, while still obtaining roughly the same lifetime Social Security benefits as under the “maximize” strategy
Regardless of whether your personal situation is applicable to the study analyzed, author Marty Allenbaugh demonstrates how the free T. Rowe Price Social Security Benefits Evaluator tool can help investors find the best compromise.
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Using Portfolio Returns to Determine When to Claim Social Security Benefits |
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By Brian L. Betker
At what age should you claim Social Security benefits? For a new retiree, this question involves a trade-off that is easy to recognize but difficult to analyze. In the article, Using Portfolio Returns to Determine When to Claim Social Security Benefits, author Brian Betker analyzes “failure probabilities” (the probability that the nest egg will be exhausted prior to death) for a 62-year-old retiree using four Social Security claiming scenarios: claim at 62, pre-commit to claiming at 66 or 70 and the “look-back” strategy whereby the decision to claim at 66 is conditioned on the nest egg portfolio’s performance over the previous four years.
Some of the topics covered in the article include:
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The probability that a nest egg portfolio will be exhausted for different scenarios
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Benefits of using the “look-back” option relative to the “static” strategy
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Optimal claiming strategies for singles/married couples
The best decision depends not only on the prior investment performance of the retirement assets, but on the size of the original nest egg portfolio as well. The simulations discussed in this article highlight the importance of looking back at recent investment performance before deciding whether to claim Social Security benefits.
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Member Question
Are you making any finance-related resolutions for 2020/2021?
A) Yes
B) No
C) Unsure
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Be sure to vote on this week’s question for the opportunity to offer your insights on our open-ended question. |
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Guide to the Top Mutual Funds 2020 |
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 AAII’s most popular guide has been refreshed online with a new look and new functionality this year! For starters, you now have access to monthly data on a universe of 25,000 mutual funds. Select a category from the expanded fund listings section to scroll through data that is sortable by any column. For your convenience, lists can be exported to an Excel file for offline analysis. When you identify the funds that interest you the most, you can simply put a checkmark in the Compare column to view their returns and other essential facts on a head-to-head basis. Check out this reimagined member benefit today! More » |
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