Wharton Proposal to Strengthen SS: Lump Sums?

[athena53]

Link to article

Delay Social Security or Not? How Lump Sum Payments Could Help

Interesting idea: studies they've done show that people planning to quit work at 62 and collect SS might be motivated to keep working if they were offered that same monthly amount at a later age (e.g., FRA) plus a lump sum. The lump sum, of course, would be a function of the foregone SS income between age 62 and actual filing age, but something less than what's "actuarially fair".

I see the advantage for the solvency of SS. My concern would be that the people who would take advantage of this might be the ones who need the larger monthly income from waiting (which they're giving up) and that they might squander the lump sum. I'd also be concerned about the tax bill on the lump sum.

Good idea or bad?

 

[USGrant1962]

No opinion, but it would give us an excuse for a weekly "take/don't take the SS lump sum" thread to add to "when to take SS" and "paying off the mortgage."

 

[joeea]

I don't need any incentive to delay my benefits. So that change would be of no use to me.

 

[Independent]

Most people who post here intend that the date they quit work will be/was different from the date they start SS benefits.

I expect that for most people not posting on an "early retirement" forum, those dates are the same.

Mitchell is concerned about "retirement security", specifically those people who really can't afford to quit work at 62, but haven't thought through how expensive retirement can be, so they quit work and retire without sufficient total resources.

Mitchell is hoping that the option of a lump sum will keep people working longer and those people will save some meaningful portion of what they earn, or of the lump sum.

She is hoping that is true for people who haven't saved much in the past.

She is also hoping that the people who were planning to work past 62 anyway, will not be tempted by the lump sum option and take it just so they can fund that trip to Hawaii or new RV that they really can't afford.

That seems like a lot of assumptions to me.

 

[Red Badger]

That lump sum might not look so attractive is there a tax on 85% of it.

And yep, lots of assumptions and speculation on a highly unlikely scenario.