Optimal Retirement Age Under Normal and Negative Market Conditions Considering Social Security and Private Savings

Tucker, Michael
July 2009
Journal of Financial Planning;Jul2009, Vol. 22 Issue 7, p42
Academic Journal
• The present value (PV) of a man's mortality weighted income from Social Security (SS) and private savings discounted to age 62 is maximized at the retirement age of 62 for all possible retirement ages from 62 to 70. • The greater the proportion of retirement income derived from SS the more advantageous is delayed retirement when an enhanced standard of living is the decision criterion. • Optimal retirement age may be different when the decision criterion is shifted from maximizing PV at age 62 to optimizing the level of retirement income. Expected higher PV at retirement ages beyond 62 may motivate delaying retirement in exchange for a higher standard of living. After portfolio declines at age 62, potential retirees are faced with lower income or delay of retirement if they want to regain anticipated income. Exhausting private savings is more of a concern after a portfolio decline, particularly if previously anticipated. income is desired and more of that income is dependent on private savings. In many cases, retirees with more income dependent on savings will be unable to recover even by delaying retirement to age 70.


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