There’s a podcast out of the Wharton School of Business at the University of Pennsylvania about one professor’s theorizing about ways to convince people to work longer and delay starting their Social Security benefits. She wonders whether some lump sum bribe would work.
With fewer than 10% of people now waiting to age 67 to start drawing Social Security, I’m doubting this scheme would work. Health issues drive many, perhaps most, retirement decisions. People are much more into sufficing rather than maximizing income and wealth than this professor realizes.
Governments incentivize people to do some things and avoid doing others. This is an area where additional incentives seem over the top to me. Elderly poverty is certainly a problem but I don’t think this would be an appropriate or effective way of addressing the problem.
7 comments:
They seem so concerned about the elderly not having enough money later on ... Don't believe it. This is clearly aimed at cutting benefits by getting people to wait . I knew a man who worked 60+ hours a week in order to maximize his SSA , then died 6 weeks before he was going to retire at 66+.
Considering the overwhelming majority of late filers are high tax brackets, this seems like another handout to the rich, albeit an impressively cloaked one.
Many of the people I talk to that file early that could wait by either continuing work at desk type or light jobs say, "I don't know that I will live that much longer." They are correct in not knowing how long they will live but odds are if you are 62 and in reasonable health, you may make it to 80 or so.
There is a reason that higher income people do wait to claim their benefits at 66 or 70. Some know that making a short term sacrifice is worth the long term gain.
12:25pm Ahh . . . "you may make it to 80 or so". There's the rub. Overall life expectancy for males is not "80 or so" -- more like 76. And certainly, no one knows how long he/she will live. By its nature, social security was designed to help supply income lost upon retirement, disability, or death. It will not outlive the person. So anyone who waits to take a retirement check is betting, with one huge factor unknowable. As for life expectancy, those of us who were hit by a cancer diagnosis in our 50s, with no risk factors and no warning, know that even as a survivor, cancer can recur in distant parts of the body, sort of a potential time bomb. So a bird in the hand . . .
Professor Mitchell makes some statements that are misleading, for example "every year you delay, your benefits go up by 8%." This is only true after your full retirement age (FRA). From age 62 until 3 years before FRA, you only get 5% more per year you delay. From that age to FRA, you get 6.67% per year more. The next statement (referring to the 8%)starts with "You basically can’t earn that on assets..." - but you get the extra 8% to compensate for getting benefits for one less year, so it is not earnings in the sense of earnings on assets (the rest of the sentence doesn't make much sense to me).
One thing that might cause people to delay claiming is to quit saying that the money is going to run out. If you believe that, then you might want to get some money as soon as you can. And some young people do not support Social Security at all because they think it will be gone by the time they can claim benefits, which is not true. Even talk of the "cliff" (which the professor mentions, but she says "a few years from now", whereas it's 16 years from now, and a 23% reduction, not 25%) is not helpful - I think it is very unlikely to happen.
@ 141 At 65 the life expectancy is 84 years. And delaying benefits helps your spouse if one should outlive you. Many people don't have an option, they may have to work longer than they wanted or may be laid off. But for those who financially have that option (work a few more years or not draw for some other reason) it may be prudent to delay filing.
Taking retirement early is betting too--that you aren't going to live that long. And if you should, you may wish you had that 32% more or even a greater amount if it's age 62 vs 70. Some people would rather live a bit better off for less years of retirement than live like a pauper for 4-5 more years.
Just remember your higher benefit may work against you when you are trying to get Medicaid for your Long Term Care when the dementia kicks in. At an average cost of $6500/ month you are going to have nothing left in a few years. Enjoy Shady Pines, hope your kids make some money!
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