Rosa is about to turn 62 and she is in dillema whether to take reduced social se

Question

Rosa is about to turn 62 and she is in dillema whether to take reduced social security benefits at 62 or wait till 65 to get full benefits. She would be entitled to get $20,250 annually at full retirement age of 65, while she would get 77.5% of this amount if she decides to take social security at 62.

Which option she should select if she can earn 8% return and her life expectancy is 80 years?

A) She should start taking at 62 since present value of benefits is $147,080 as against $132,266 at 65

B) She should start taking at 62 since present value of benefits is $147,080 as against $137,595 at 65

C) She should wait till 65 since present value of benefits is $173,329 as against $147,080 at 62

D) She should wait till 65 since present value of benefits is $173,329 as against $138,599 at 62

Explanation / Answer

C) She should wait till 65 since present value of benefits is $173,329 as against $147,080 at 62

PV at 62 Year

PV at 65 Year

Year Cash Flow PVF @8% PV 1 15693.75 0.92592593 14,531.25 2 15693.75 0.85733882 13,454.86 3 15693.75 0.79383224 12,458.20 4 15693.75 0.73502985 11,535.37 5 15693.75 0.6805832 10,680.90 6 15693.75 0.63016963 9,889.72 7 15693.75 0.5834904 9,157.15 8 15693.75 0.54026888 8,478.84 9 15693.75 0.50024897 7,850.78 10 15693.75 0.46319349 7,269.24 11 15693.75 0.42888286 6,730.78 12 15693.75 0.39711376 6,232.20 13 15693.75 0.36769792 5,770.56 14 15693.75 0.34046104 5,343.11 15 15693.75 0.3152417 4,947.32 16 15693.75 0.29189047 4,580.86 17 15693.75 0.27026895 4,241.53 18 15693.75 0.25024903 3,927.35 NP of Benfit 147,080.05

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