Society of Actuaries Examine How Timing, Working Longer and Benefit Claiming Strategies Can Improve Retirement Outcomes

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Nov 20, 2013, 12:06 ET

SCHAUMBURG, Ill., Nov. 20, 2013 /PRNewswire-USNewswire/ -- Focusing on practical yet impactful ways to help individuals plan for retirement, the Society of Actuaries (SOA) released the research report, "Improving Retirement Outcomes: Timing, Phasing, and Benefit Claiming Choices." The report analyzed the different retirement timing choices and benefit claiming strategies that impact financial resources of individuals. Individuals may decide to reduce living expenses, retire later, work on a reduced basis, and/or claim Social Security later to increase the monthly benefit.

"People often claim Social Security early at age 62 despite a reduction in benefits," said actuary Anna Rappaport, FSA, MAAA. "Individuals need to determine the impact of claiming Society Security benefits at different times. They also need to think longer term about their retirement, including the possibility of working longer, full-time or part-time."

The report was co-authored by Colorado State University professor Vickie Bajtelsmit, LeAndra Foster, ASA, of Della Parola Capital Management, and Rappaport. They studied labor force trends of older workers, including phased retirement programs, which can make it easier for individuals to continue some of their benefits by working longer. There is no universal definition of phased retirement and it can include part-time employment, entrepreneurism or rehiring retired employees.

The report includes a simulation comparing two married couples at age 62, who represent the 50^th and 75^th percentiles of income. The simulation findings suggest that combining retirement strategies can help make it through retirement without running out of money or reducing the standard of living. For instance, delaying retirement and Social Security claiming significantly reduces the amount of wealth necessary for retirement. Phasing strategies can also reduce the amount of wealth needed for retirement. These strategies improve the chances of making it through retirement, but they do not reduce the extra costs from major health events and long term care situations.

The simulation findings note that a $60,000-income household needs $388,000 at age 66 to be 90 percent sure of meeting all financial needs, but they would need $678,000 to be 95 percent confident. To be 95 percent confident of meeting all financial needs in retirement requires more than double the savings needed on average.

The SOA report is a follow up to the January 2013 report, "Measures of Retirement Benefit Adequacy: Which, Why, for Whom, and How Much?" on the methodology and models of post-retirement management strategies. For the full report, "Improving Retirement Outcomes: Timing, Phasing, and Benefit Claiming Choices," visit http://www.soa.org/Research/Research-Projects/Pension/research-2013-improving-retirement.aspx.

About the Society of Actuaries

The Society of Actuaries (SOA) is an educational, research and professional organization dedicated to serving the public, its members and its candidates. The SOA's mission is to advance actuarial knowledge and to enhance the ability of actuaries to provide expert advice and relevant solutions for financial, business and societal problems. The SOA's vision is for actuaries to be the leading professionals in the measurement and management of risk. Visit http://www.soa.org

Pat Gould
847.706.3615
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SOURCE Society of Actuaries