Silvia is expected to receive full social security retirement benefit of $1525 p

Question

Silvia is expected to receive full social security retirement benefit of $1525 per month when she turns 67. She can take early retirement with reduced benefits starting from age 62. She will have no other income and taxes once she retires. Should Silvia take early retirement at age 63 or full benefit at age 67? Assume expected return to be 9.5% and life expectancy of 88 years.

ANSWERS:

A. At 67 since present value at 63 for taking retirement at 67 is $166,224

B. At 63 since present value at 63 for taking retirement at 63 is $129,531

C. At 67 since present value at 63 for taking retirement at 67 is $115,621

D. At 63 since present value at 63 for taking retirement at 63 is $132,654

Explanation / Answer

C. At 67 since present value at 63 for taking retirement at 67 is $115,621

present value at 63 for taking retirement = 1525*(1-(1+0.095/12)^-252)/(0.095/12) *1.095^-4 = $115621

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