But There Is One Clear No-Brainer
In at least one situation, delaying Social Security is the obvious choice, according to another NBER paper published this month. Doing so could save high-income seniors as much as $250,000, the authors find.
The calculations apply to retirees who are planning to eventually buy an annuity, or take a defined-benefit pension instead of a lump sum from their employer. In those cases, there’s a clear “arbitrage opportunity” because delaying Social Security is an efficient way to boost benefits, the researchers state. Such retirees should live off their savings in the meantime rather than put all their assets into a private annuity.
It also may make sense to take part of a defined-benefit pension as a lump sum, and use that money to live while delaying Social Security benefits. “Employers could help employees integrate their pensions with Social Security deferral by offering annuities that provide higher payments through age 70 and lower payments thereafter,” the authors suggest.
So, you don’t know when you’re going to die, and complicated government rules muddy your options even more. However, one thing is clear enough: If you’re faced with a choice of which income stream to rely on for the rest of your life, Social Security is almost certainly the most powerful choice.
This article was provided by Bloomberg News.