When to claim Social Security vs Life-only Annuity

omni550

Thinks s/he gets paid by the post
Joined
Mar 7, 2004
Messages
3,488
moz-extension://5dd0dedf-1ef1-4db3-835a-37f57b66d0f1/pdf?url=https://cdn.pficdn.com/cms1/dcsolut...urns-for-Delayed-Social-Security-Claiming.pdf

From a paper prepared for industry professionals: BREAKEVEN RETURNS FOR DELAYED SOCIAL SECURITY CLAIMING | PGIM DC SOLUTIONS

CONCLUSION
The decision about when to start claiming Social Security retirement benefits can have significant implications
on the retirement outcomes for Americans. This article provides context on the required breakeven returns for
various Social Security claiming scenarios and various longevity planning ages. For most retirees who have the
assets to choose when to claim benefits, and the health to consider to do so, the required breakeven return is
likely to exceed 8% for single individuals and 10% for married couples. Note, this breakeven return is net of
inflation and fees.
The breakeven return for purchasing a life only annuity is lower than delayed claiming, typically in the
neighborhood of 6% for more common longevity planning ages (e.g., age 90 or over). This suggests that while
purchasing a life annuity can add value, delayed claiming Social Security should likely be considered first, given

the higher breakeven return.

omni
 
They don't really provide enough to follow their numbers but the results aren't surprising. Below is my analysis comparing 62 vs 70 and 67/FRA vs 70 for each $12,000 of PIA. I expect my/our longevity to be early 90s so the real IRR of deferring would be 4.39% real return (significantly better than ~2% TIPs yields) and would be 6.39% nominal return assuming a 2% inflation rate.

SS at 62​
SS at 70​
Difference​
Real IRR​
SS at 67​
SS at 70​
Difference​
Real IRR​
62​
9,000​
-9,000​
63​
9,000​
-9,000​
64​
9,000​
-9,000​
65​
9,000​
-9,000​
66​
9,000​
-9,000​
0​
67​
9,000​
-9,000​
12,000​
-12,000​
68​
9,000​
-9,000​
12,000​
-12,000​
69​
9,000​
-9,000​
12,000​
-12,000​
70​
9,000​
14,880​
5,880​
12,000​
14,880​
2,880​
71​
9,000​
14,880​
5,880​
12,000​
14,880​
2,880​
72​
9,000​
14,880​
5,880​
12,000​
14,880​
2,880​
73​
9,000​
14,880​
5,880​
12,000​
14,880​
2,880​
74​
9,000​
14,880​
5,880​
12,000​
14,880​
2,880​
75​
9,000​
14,880​
5,880​
12,000​
14,880​
2,880​
76​
9,000​
14,880​
5,880​
12,000​
14,880​
2,880​
77​
9,000​
14,880​
5,880​
12,000​
14,880​
2,880​
78​
9,000​
14,880​
5,880​
12,000​
14,880​
2,880​
-5.19%​
79​
9,000​
14,880​
5,880​
-2.22%​
12,000​
14,880​
2,880​
-3.31%​
80​
9,000​
14,880​
5,880​
-1.12%​
12,000​
14,880​
2,880​
-1.79%​
81​
9,000​
14,880​
5,880​
-0.20%​
12,000​
14,880​
2,880​
-0.54%​
82​
9,000​
14,880​
5,880​
0.57%​
12,000​
14,880​
2,880​
0.49%​
83​
9,000​
14,880​
5,880​
1.23%​
12,000​
14,880​
2,880​
1.36%​
84​
9,000​
14,880​
5,880​
1.80%​
12,000​
14,880​
2,880​
2.09%​
85​
9,000​
14,880​
5,880​
2.29%​
12,000​
14,880​
2,880​
2.71%​
86​
9,000​
14,880​
5,880​
2.71%​
12,000​
14,880​
2,880​
3.25%​
87​
9,000​
14,880​
5,880​
3.09%​
12,000​
14,880​
2,880​
3.70%​
88​
9,000​
14,880​
5,880​
3.41%​
12,000​
14,880​
2,880​
4.10%​
89​
9,000​
14,880​
5,880​
3.70%​
12,000​
14,880​
2,880​
4.45%​
90​
9,000​
14,880​
5,880​
3.96%​
12,000​
14,880​
2,880​
4.75%​
91​
9,000​
14,880​
5,880​
4.19%​
12,000​
14,880​
2,880​
5.02%​
92
9,000
14,880
5,880
4.39%
12,000
14,880
2,880
5.26%
93​
9,000​
14,880​
5,880​
4.57%​
12,000​
14,880​
2,880​
5.46%​
94​
9,000​
14,880​
5,880​
4.73%​
12,000​
14,880​
2,880​
5.65%​
95​
9,000​
14,880​
5,880​
4.88%​
12,000​
14,880​
2,880​
5.82%​
96​
9,000​
14,880​
5,880​
5.01%​
12,000​
14,880​
2,880​
5.96%​
97​
9,000​
14,880​
5,880​
5.13%​
12,000​
14,880​
2,880​
6.09%​
98​
9,000​
14,880​
5,880​
5.24%​
12,000​
14,880​
2,880​
6.21%​
99​
9,000​
14,880​
5,880​
5.34%​
12,000​
14,880​
2,880​
6.32%​
100​
9,000​
14,880​
5,880​
5.43%​
12,000​
14,880​
2,880​
6.42%​
 
I have a cash balance plan in deferral - same thing as a life only annuity. I also am still deferring my SS at age 66 currently. The math differences between the relative value of deferral depends on inflation and interest rate assumptions. My SS benefit amount will soon begin increasing at the standard 8%/yr after FRA later this year. My future pension benefit calculations have an imbedded assumed interest rate and mortality table. For the next twelve months my pension increases by 9.2% for the year deferral, but the rate of change isn't linear and is increasing. For the year age 69-70, the projected benefit increase for deferral is 9.95%. The pension isn't inflation adjusted, but has two additional benefits for deferral: It retains a cash value if I cork it before initiation and deferral can be pushed out to 73.5.

At 66, I'm not in a situation of needing to turn on an income stream, but I revisit the calculations of which would be better to start between SS and pension if I needed the income now from one. The monthly benefit between them is currently almost identical. It is nuanced, but in my case it looks like I'd start SS first. Without a major market pullback or unforeseen individual issue, I likely will defer both to their respective limits.
 
I don't really see a question from Omni, the OP...
Regardless, I started my lifetime TIAA payout annuities at start of retirement, age 63. The majority were variable, based on commercial real estate (TREA) and the broad stock market (CREF Stock).
As a result, my monthly payment has increased considerably since 2013.

I also started SS at age 70, which is the general recommendations for healthy wealthy bastards trying to do Roth conversions prior to RMD time.

It all worked out swimmingly...
 
Back
Top Bottom