Good read on deferring SS versus QLAC

[Big_Hitter]

How much can I afford to spend in retirement?

 

[pb4uski]

What is the spending assumed in the model?... doesn't say that I can find.... or is he just looking at income but if so how is he including investment results on the retirement assets.

 

[DrRoy]

His conclusion is based on when the subject is going to die. Rather not helpful for most.

 

[Big_Hitter]

What is the spending assumed in the model?... doesn't say that I can find.... or is he just looking at income but if so how is he including investment results on the retirement assets.

Not sure he models spending - he's a retired actuary

 

[Big_Hitter]

His conclusion is based on when the subject is going to die. Rather not helpful for most.

we all have finite lifetimes

 

[pb4uski]

Not sure he models spending - he's a retired actuary

I'm not sure his approach makes a lot of sense but it is less than totally clear what he is calculating and how it is relevant to assessing the optimal alternative. Like many actuaries, his communication skills could be better. (From a former life finance guy who spent a lot of time with life actuaries - most very good and some much less so.)

 

[Big_Hitter]

I'm not sure his approach makes a lot of sense but it is less than totally clear what he is calculating and how it is relevant to assessing the optimal alternative. Like many actuaries, his communication skills could be better. (From a former life finance guy who spent a lot of time with life actuaries - most very good and some much less so.)

words, pictures and numbers

instead of using an annuity factor he's estimating a present value at 65 depending on age at death. as you can see on the chart, the longer you live the better the qlac option

 

[pb4uski]

.....instead of using an annuity factor he's estimating a present value at 65 depending on age at death. as you can see on the chart, the longer you live the better the qlac option

Yeah... perceptive glimpse of the obvious.

 

[Big_Hitter]

Yeah... perceptive glimpse of the obvious.

I would have used an annuity factor at 65 to compare the options rather than an assumed age at death. Not my blog though.

 

[pb4uski]

I agree... an expected present value approach combining mortality and the time value of money to assess which approach is optimal.

 

[Big_Hitter]

well when I finally pull the chute I'll probably do a lot of blogging on this and other subjects

 

[Independent]

I can't match his numbers.

In the first column, it appears that the pv of the first 5 SS benefits is $96,227.
And, the pv of the next 5 SS benefits is ( $183,551 - $96,227 ) = $87,324.

In the second column, the pv of the first 5 SS benefits is, of course, $0.
Each of the second 5 SS benefits should be 1.4143 times the corresponding SS benefit in the first column. (I'm using the factor he provides for the SS increase from deferring to age 70.)
Therefore, in the second column, I expect the pv of the second 5 SS benefits to be 1.4143 x $87,324 = $123,501.

But, his table shows it as $113,330.

 

[nun]

In all my planning I simply assume I'll live an average lifespan....83.....as I have no way to come up with a better number. I have longevity insurance as I have a small COLAed pension so the higher income past 83 that deferring SS would give me isn't a big factor for me. In my projections when I take SS has an insignificant difference to my net worth at age 83. So when I take it will just depend on my desire for the extra income.