I'm currently 63yo and a former pension actuary (ASA). During a meeting with my financial planner, we were discussing the pros/cons of starting Social Security benefits at my NRA (66) or wait until I'm 70.
Based on my actuarial training, back in the day, the proper actuarial analysis compares the following:
Age 66 immediate annuity vs. 4-year deferred Age 70 annuity x 1.32.
The 1.32 factor, of course, reflects the increase in delaying the SS benefit.
My planner's analysis looked like this:
Based on whatever actuarial tables he was using, my life expectancy was 83, or something. Let's just use 83.
Then, he calculated the PV(age 66 to 83 SS benefit) and compared it to the PV(deferred age 70 to 83 benefit x 1.32). I forget the terminology, but this is just a plain ol' PV calculation without the mortality.
I believe he is wrong, but I'm having a difficult time articulating the problem. It has to do with the fact that his calculation does not take into account that I might not live to age 83, or I might live longer.
Or, notwithstanding the fact that he is using actuarial tables, he is turning what should be a probabilistic model into a deterministic model.
Your thoughts? I'm still scratching my bald head over this.
Thanks for reading.
Based on my actuarial training, back in the day, the proper actuarial analysis compares the following:
Age 66 immediate annuity vs. 4-year deferred Age 70 annuity x 1.32.
The 1.32 factor, of course, reflects the increase in delaying the SS benefit.
My planner's analysis looked like this:
Based on whatever actuarial tables he was using, my life expectancy was 83, or something. Let's just use 83.
Then, he calculated the PV(age 66 to 83 SS benefit) and compared it to the PV(deferred age 70 to 83 benefit x 1.32). I forget the terminology, but this is just a plain ol' PV calculation without the mortality.
I believe he is wrong, but I'm having a difficult time articulating the problem. It has to do with the fact that his calculation does not take into account that I might not live to age 83, or I might live longer.
Or, notwithstanding the fact that he is using actuarial tables, he is turning what should be a probabilistic model into a deterministic model.
Your thoughts? I'm still scratching my bald head over this.
Thanks for reading.
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