Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Support MFO
Donate through PayPal
Q&A With Scott Burns: Have A Long Life Expectancy? Defer Your Social Security Benefits
FYI: Q. One of your recent columns was very interesting to me. It was from a 61-year-old woman with a 74-year-old husband. I am 62 and my husband is 78, so there are similarities. However, you assumed (or maybe the writer included the information but it was not in the printed question) that her Social Security benefits would be less than her husband’s, and therefore she should start taking her own benefits right away. Regards, Ted https://assetbuilder.com/knowledge-center/articles/have-a-long-life-expectancy-defer-your-social-security-benefits
"it’s pretty much a slam-dunk. If you defer for 8 years at 62, your life expectancy at 70 will still be 5.4 years greater than what you’d need to “break-even” on the decision." (That is, you'll be expected to live to age 87.9)
- and -
"In your case, the most important work record is yours and the decision is keyed to your life expectancy alone, not to your joint life expectancy as a couple" ("you" here being the younger spouse)
Wrong and wrong.
In the first statement, Burns neglected to add: if you live to age 70 then you may expect to live to age 87.9. But the odds of living to 70 are not 100%.
He's ignoring the current expectation that the woman will live to 86.1 (age 62 + 24.1 average life expectancy). Instead, he's saying "never mind, we'll just pretend that you don't die in the next eight years." See conditional probability.
In the second statement, the higher benefit lasts so long as either spouse is alive. So if the husband (with the lower benefit) outlives the wife (with the higher benefit), the wife's benefit rolls on. Now it's true that where the husband is 16 years older than the wife, the odds of that happening are small, but not zero.
Burns is pretending (again) that this will never happen, just as with the first statement he's pretending that it would never happen that the wife died before reaching age 70.
These may be "common sense" fictions, but they're not 100% certain, and when one is talking probabilities, one has to use actual numbers.
Comments
(That is, you'll be expected to live to age 87.9)
- and -
"In your case, the most important work record is yours and the decision is keyed to your life expectancy alone, not to your joint life expectancy as a couple"
("you" here being the younger spouse)
Wrong and wrong.
In the first statement, Burns neglected to add: if you live to age 70 then you may expect to live to age 87.9. But the odds of living to 70 are not 100%.
He's ignoring the current expectation that the woman will live to 86.1 (age 62 + 24.1 average life expectancy). Instead, he's saying "never mind, we'll just pretend that you don't die in the next eight years." See conditional probability.
In the second statement, the higher benefit lasts so long as either spouse is alive. So if the husband (with the lower benefit) outlives the wife (with the higher benefit), the wife's benefit rolls on. Now it's true that where the husband is 16 years older than the wife, the odds of that happening are small, but not zero.
Burns is pretending (again) that this will never happen, just as with the first statement he's pretending that it would never happen that the wife died before reaching age 70.
These may be "common sense" fictions, but they're not 100% certain, and when one is talking probabilities, one has to use actual numbers.