Social Security Reset: When Does It Make Sense?

Ryan, Charles
June 2010
Journal of Financial Planning;Jun2010, Vol. 23 Issue 6, p62
Academic Journal
• The majority of Social Security retirement beneficiaries claim early and reduced benefits.This is not an irrevocable decision. At a later age, claimants can repay past benefits and reapply for a greater benefit amount commensurate with that greater age. • This paper identifies and analyzes client cases in which lifetime household wealth may be increased by resetting Social Security benefits. Retirees who are risk averse and/or considering an immediate real annuity may find that they will receive a much greater benefit amount if they instead reset their Social Security benefit. • Reductions or increases to retirement benefits are actuarially equivalent for the person with average life expectancy, an unmarried retiree should be indifferent to when he or she makes a claim. However, optimal claiming ages for married couples may be determined by recognizing: (a) the increase to a retirement benefit from delayed retirement credits continues after the workers death in the form of a widow(er)'s benefit; (b) there is no actuarial reduction to a widow(er)'s benefit if the surviving spouse is significantly younger; (c) on average, women live three years longer than men. Among married couples in which the older or less healthy spouse has the greater benefit amount, resetting the benefits of that older spouse may increase lifetime household wealth because the increased benefit will continue in the form of a survivor benefit After repaying benefits, time must elapse before the retiree breaks even on the transaction. If an unmarried retiree dies during this period, his or her heirs will bear the risk of a reduced bequest. Among married couples, if a spouse dies during this period, the financial outcome is largely dependent on differences in spousal ages and benefit amounts.


Related Articles

  • SURVEY OF INVESTMENT CHOICE BY PENSION FUND MEMBERS. Rozinka, Erina; Tapia, Waldo // OECD Papers;2007, Vol. 7 Issue 1, p1 

    The article reports on the result of the survey which focuses on evaluating the investment choice of pension fund beneficiaries in nine Organisation for Economic Co-operation and Development (OECD) member countries. It states that the survey was participated by beneficiaries in occupational...

  • Social Security Spousal Benefit Considerations in Early Retirement. Rose, Clarence C. // Journal of Financial Service Professionals;May2007, Vol. 61 Issue 3, p48 

    For many individuals, the most critical decision affecting Social Security retirement planning is when to begin receiving benefits. For married couples expecting to utilize the Social Security spousal benefit, early retirement may have a major impact on the lifetime benefits received. This...

  • Time is running out for rethink on retirement and pensions. O'Donovan, Debi // Employee Benefits;Jul2009, p5 

    The author offers his opinion on retirement and state pension practice in Great Britain. She says that while the number of pensioners will rise, the working population will decline, and this phenomenon will result to a greater drain in resources. She examines the contract-based schemes that most...

  • Dollar for dollar. Lynott, William // Dermatology Times;Jul2009, Vol. 30 Issue 7, p106 

    The article offers information related to practice management. It discusses the difference between after-tax dollars and before-tax dollars, early investment to retirement plans, travel and car expenses. Moreover, it mentions that some types of assets can be classified as tax-inefficient and...

  • Deriving Preretirement Income Replacement Rate Targets and the Savings Rates Needed to Meet Them. Schieber, Sylvester J. // Benefits Quarterly;1998 Second Quarter, Vol. 14 Issue 2, p53 

    This article presents an updated and more effective model to determine the relative needs standards for preretirement income replacement. The author discusses the need to measure consistent standards of living both before and after retirement, so that a relevant goal may be established for...

  • MM Leader: Valid concerns over pension charge cap.  // Money Marketing (Online Edition);11/14/2013, p80 

    The article cautions against dismissing concerns about a proposed pension charge cap of 0.75-1 percent. It also warns that suggestions for all schemes to be rewritten and stripped of commission could result to unintended consequences for employers and their staff. It cites the results of an ABI...

  • Automatic enrollment beats company match, research shows. Butler, Kelley M. // Employee Benefit News;Sep2006, Vol. 20 Issue 11, p45 

    The article reports on the advantages of automatic enrollment and other automated features on when it comes to encouraging employees into a retirement plan according to a report by TIAA-CREF. The percentage of eligible employees who did not participate in their retirement plan according to a...

  • Plan Participants Want Estimate of Lifetime Income. Couch, Noel // Plan Sponsor News;2015, p10 

    The article reports on a survey conducted by the Insured Retirement Institute (IRI) which shows that 90 percent of respondents want an estimate of lifetime income to be included in their retirement benefit statements. Topics discussed include the majority of respondents asking for online...

  • Retirement mistakes to avoid.  // Finweek;11/12/2015, p36 

    The article identify the retirement mistakes made in saving towards retirement. It mentions that pensioners often discover too late that their savings might not be enough to adequately support them during retirement. It further discussed five retirement mistakes to avoid which includes not...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics