Retirement payout choices

by Finn

You’re approaching retirement. You are vested in a retirement plan from an employer, either your current or previous employer. You have the option to take the retirement payout as a single or joint and survivor annuity, or as a lump sum.

Which would you choose? What factors would affect your decision?


71 thoughts on “Retirement payout choices

  1. Is the plan well funded?
    How long do people in my family and spouse’s family live on average?
    How much is it and how will a lump sum affect taxes?
    What % of retirement assets is it?
    What are my other assets?

  2. I have a pension from my employer. They discontinued adding any new employees to it in 2012 and new funds to it in 2014. Value is pretty low ~$15k lump sum or a couple hundred dollars a month in retirement (depends when start collecting). Whenever I leave this job, I plan on cashing out and putting the money towards “retirement fund” of an income producing property (will likely have to supplement for a down payment). My company has already had 1 merger since the pension change, and there are many people in line ahead of me for the money (lots of boomers). I do not expect the money there when I retire. It’s not my only retirement asset, just some extra gravy on top.

  3. I have a pile of money in TIAA CREF, in those age based funds, and some money in a 401K. I am about to move the money from the 401K to the TIAA CREF because they are switching the company that runs the 401K and I don’t want to go to it. I have to do this by Dec 20, and I know it is going to be a hassle – these things always are. Anyway, at that point it will be all TIAA CREF. My father had TIAA CREF and I think when he retired he did some kind of annuity. He seemed happy enough with it. I don’t know why he chose that, and he probably didn’t either.

  4. Well, first, plan stability. I have heard/read too much about underfunded pensions for the past couple of decades. So in my head, there’s a discount factor already associated with taking it as an annuity. But as of now, DH’s employer seems very stable and not particularly likely to go anywhere.

    Second, gotta do the math. Not me, of course :-) — DH or an advisor. I know there can be different payout calculations and assumptions between different programs, and that those can make the pension “worth” more than the cash value or vice-versa.

    Beyond that, we need to look at cashflow and other income sources. We plan to retire before SS age, and we also plan for that to be our most expensive years with all the travel. One thing we have already noticed is that the pension allows withdrawals starting at 55 — and it doesn’t seem to provide the same significant increase in benefits for delays as SS does — so if we want some sort of base-level annuity income, and we want it early, the pension could be a good source of that. But we obviously have to consider that together with the SS timing options.

    The last part is just purely emotional: when my stepdad died, my mom was absolutely freaking out about how she was going to pay the bills (even though she had absolutely no reason to do so — there was no logic involved). When she called the gov’t benefits people to notify them and found out that he had opted for the full spousal coverage (so she got 100% of his benefit, not just the 50% she expected), she burst into tears with relief. That stuck with me, that emotional relief of having a guaranteed income that was going to be enough to cover her basic bills, that she knew she was going to be financially ok. So that probably pushes me more toward the side of the annuity option than I had ever previously considered. Unfortunately, DH has chosen the 50% survivor benefit option, so I’ll have to weigh that against the long-term value of getting 100% of that pot of money. :-)

  5. How long do people in my family and spouse’s family live on average?

    Well, that’s a tough one. My dad’s side – mid 50s. Mom’s – late 80s.

  6. Everything I/we have is in the form of a 401k or rollover IRA, no pensions. So annuitizing the value of our retirement money will be up to us. When we retire, if I don’t get to it before then, I’ll move everything to the same trustee just for simplicity (transferring in kind as much as possible), although aggregating assets all in one place, like getting all your miles from one airline, will drive some benefits our way.

    Even if I/we had a pension, I’d probably opt for taking the lump sum today and investing it. We (and you all) already have a huge annuity set up called Social Security. Yeah, I know, subject to changes made by congress, but I think I’m old enough to be grandfathered into the current setup.

  7. I have one small pension, in which I took full survivor benefits. My dad’s side of the family tends to die around 50, DH’s grandparents lived until their late nineties. Most of the retirement income expected to come in the form of rental income. The 401K stuff I having figured out much about. I just kept throwing money in there while I had my other career. It’s safe from bankruptcy if all goes south, so we won’t starve.

    If I had the option of a lump sum or pension AND it looked the company was long term solvent, I think I’d take the pension, but I have enough risk tied up in other things and I’m not sure how fast cognitive decline will hit and how much I’ll want to or be able to learn another industry.

  8. “Unfortunately, DH has chosen the 50% survivor benefit option, so I’ll have to weigh that against the long-term value of getting 100% of that pot of money. :-)”

    Is he already locked in to that choice?

    I think I will get to choose lump sum vs annuity, and if annuity, single vs whatever survivor options I have, at retirement.

  9. You have the option to take the retirement payout as a single or joint and survivor annuity, or as a lump sum.

    From the phrasing, I assume they are taking the lump sum and buying the annuity from an insurance company. In that case just check the state insurance limits that apply to your situation.

  10. “If I had the option of a lump sum or pension AND it looked the company was long term solvent, I think I’d take the pension”

    Another option that comes to mind is taking the lump sum and using it to buy an annuity. This might be more strongly considered if the solvency of the company providing the retirement benefit was in question.

  11. Depends on how much of your retirement income it represents. If you’re close to retirement probably not worth it due to ups and downs in the market and likelihood of actually getting your payout. I have a state pension and I’ve toyed with this idea of taking some of it out (although not at the moment). It’s supposed to generate about $1K per month (so not a huge deal), but we have the option of taking partial amounts out, and even taking $10K or $15K out now doesn’t change the benefit that much.

  12. “Is he already locked in to that choice?”

    Hmm, good question. I assumed he was, because when he pulled up his pension info online, it said that on the first screen. But logically, it makes more sense that that is something he could change up until the time he begins drawing it. I will have to look into that. Thanks.

  13. Finn, I had to make this choice in 2008. My pension was worth $15k lump sum or an estimated ~$63/month when I retired at age 65. I rolled over the lump sum value of my pension to my 401(k) provider because I didn’t want the hassle of (possibly) $63/month- I value having my assets in one place. The company was changing the net present value calculation so the lump sum value of the pension would have been less in the next calendar year, as I recall. Given that I was making decisions about my life up to 60+ years out, a bird in hand was worth two in the bush.

  14. If you choose the annuity option, I would go with the joint and survivor rather than the single-life. I have encountered many married clients who chose a single-life option for their pension and later regretted their decision (and these are people who are still alive and healthy — the regret wasn’t based on someone actually dying prematurely). But I haven’t yet encountered anyone who made the joint-and-survivor option and regretted it. I think a lot of this, as LfB mentioned, is emotional; it’s hard for people to live long-term with the thought that their choice will cut off an income stream for a surviving spouse (or, on the other side, the thought that an income stream will be cut off if they are the surviving spouse).

  15. hijack, but still financially related

    Our local rag is raising its subscription price to $66.50+tax per month (home delivery & digital access). NFW am I paying that. The digital access price is $29/yr. Yep. Per YEAR. I can get the NYTmes for $17/mo (digital all access and the ability to gift a like subscription to one other person) or $78/mo if I want hardcopy. Ok maybe I don’t want the NYT, but the point is I can get a much better product for much less. Clearly they are trying to get out of the print delivery business.

  16. Fred, are you going to switch to the digital access plan for your local paper?

    A while back, I switched from home delivery of our local paper to digital only. IIRC, I saved about $12/mo (from ~$22/mo to ~$10/mo). But DW liked having the Sunday paper with the sale ads and the travel section, so we switched to a weekend delivery plan that included full digital access.

    But after a year or so of that, without changing the plan we were on or the subscription cost, we started getting daily home delivery again.

    I’m guessing that this was a ploy to increase their circulation numbers to increase the price they could command for advertising.

  17. I just took a peek at the local paper subscription rates. $17.95/mo for digital only, but $9.75/mo for weekend delivery that comes with digital access.

    I think they really want to pump up their Sunday circulation.

  18. “that would be beneficial because you could pay them with next year’s FSA/HSA money, if necessary.”

    Check this before you commit to doing it. IME, FSA plans have sometimes had allowances to get reimbursed for next year’s expenses from this year’s contributions, but not vice versa.

  19. Making sure I understand the rationale:

    “Is the plan well funded?”

    Take the lump sum if that’s in question?

    “How long do people in my family and spouse’s family live on average?”

    Longevity favors the annuity?

    “How much is it and how will a lump sum affect taxes?”

    Biggest concern being that a lump sum distribution could cause a bump into a higher tax bracket?

    “What % of retirement assets is it?”

    If it’s a small %age, then it doesn’t matter much? If it’s a large %age, perhaps one might want more control, and that thus argues for a lump sum, some of which could be used to purchase an annuity?

    “What are my other assets?”

    One impact would be on diversification? E.g., if Social Security is most of the other assets, that’s an annuity, so that would tend to favor a lump sum. OTOH, if SS is a small %age and there are no other annuities among the assets, then that might favor an annuity?

  20. I’ve been at this from two sides. But, the pension plan will calculate all the options for you when it comes time to choose.

    Side 1 – I was the beneficiary of a relative without kids. The most revenue was generated by taking a small, fixed payment for life. As long as I outlived her by 15 years, it payed more than any other option. It was highly likely given the discrepancies in our ages (40 years). I have now outlived her by more than 20 years, so the gamble paid off. In theory it should never have gone up, but it did a bit (less than $5 month) because they increased the minimum payment to all retirees.

    Side 2 – My retirement. Of all the options, I opted to not have a beneficiary (mainly because my SO is 15 years older than I am and has a shorter life expectancy), then took a partial lump sum (which was not taxed because I rolled it over into an IRA. The partial lump sum reduced my monthly benefit, but the monthly benefit still pays out enough that I am not required to work, but the part-time job provides extra spending money and allows me to continue to contribute to a 401K.

    I felt like the partial lump sum was a hedge against the pension disappearing. Though that happening highly unlikely based on our state law and constitution (plus lawmakers are part of the same pension plan). The tweaks they have made focus on new participants – such as raising the retirement age from Rule of 80 to Rule of 85 (means age + years of service must = 80 if you are under 65 years of age) or changing out the formula for calculating your pension amount. I think they will slowly reduce the benefit and raise the “rule” so that only in a few rare cases or in law enforcement (who has slightly different rules anyway) can retire before age 65 unless they are disabled. I also think they will slowly shift to matching 401K amounts as they phase out the pension for newer employees.

    Lastly, they cannot change the rule or formula on those already retired, so my benefits do not change. I must add there is no COLA and you have to assume your monthly payment will never increase.

  21. I was on the receiving end of these decisions this year. It’s interesting to see your thought process. I wasn’t privy to my dad’s thoughts. I just got a bunch of letters telling me what I was entitled to based on his decisions.

    My tax guy has been warned of the wackiness heading his way. I’m glad we had a low income year coupled with a new deduction so we can absorb most of the financial repercussions. And we’ll probably get a new bathroom out of the deal too.

  22. “a lump sum distribution could cause a bump into a higher tax bracket?”

    Something else to consider is whether a lump sum payout could be rolled into a tax-deferred account like an IRA or 401k to allow the tax hit to be spread out.

  23. “I’d do whatever our financial advisor recommends.”

    Which could be a whole other discussion– choosing and evaluating financial advisors.

    I don’t think I’d ever just do whatever our financial advisor recommends. I’d want to do my own research and compare it to alternatives, and I’d also think about how much I trust the advisor.

    I might still end up taking the advice, but not blindly, which seems counter to totebagginess.

  24. Finn, I think you and I believe we are at least as competent as the financial advisors we would employ. For higher wealth Totebaggers, the financial advisors are probably more competent. I know people in financial advising, and I am not aware of any relevant gaps in my knowledge that they could fill. Partly that’s because I’m a low fee index fund kind of girl.

  25. Obviously I have a lot to say here but don’t have time right now for all of it.

    Plans have to let you take a 50% survivor or 75% survivor if you’re married. Some will also offer 100% survivor or single life annuities with a 10 or 15 year certain period so your survivor gets something even if you die right away. About 6 months before retirement you will get a notice showing your options and their values. You can change your election up until you actually start your benefit.
    Some plans value the survivor annuity actuariallly, meaning they reduce it by set factors depending on age. Some plans subsidize the survivor annuity, meaning you get more than you would if the plan just used actuarial factors. It’s important to understand that if you’re thinking of taking the lump sum and buying an annuity because commercial insurers (at least most) don’t subsidize the survivor.
    The PBGC protects pensions up to a limit if your employer goes under. To give you an idea, right now it’s $4800/month at age 65. But the PBGC doesn’t apply to government or church plans. Although the PBGC is underfunded it won’t go away completely.
    Sorry if not clear—work calls.

  26. As an actual retiree, I value regular cash flow that covers the monthly nut, routine entertainment and clothing and eating out, short trips/holiday visits, and normal repairs/replacements. DH has a good pension (from before our marriage) and his SS. I have a few crumbs of pension and I get a spouse’s half of his SS until I turn 70 and get my own, which will be more than his by then. So we don’t have any reason to annuitize any additional amounts. That being said, most humans like a steady income stream, whether pensions, wages, rents, annuities or dividends, so that they don’t feel like they have to part with something/sell investments or property regularly when they need or want to spend some money. Only you can know your psychological makeup. It is like being comfortable with leverage – some people want a mortgage forever, some want it paid off. Even if the numbers crunch one way, you may feel better the other.

  27. I worked for three different banks for 5 years+, and I vested in the pension plans. Two of the three banks eliminated the traditional pensions and I was given a lump sum. No choice, and it was a fairly low amount in one case vs. what I would have received in a traditional pension in 2022ish. I know the idea is that it remains invested and grows to replace those annuity payments, but that didn’t happen with one of the lump sums. It is a dud, and it is just a small nice to have sum.

    I still have one bank that hasn’t eliminated the traditional annuity type of pension, and I sort of like known that I will receive that fixed payment. It actually isn’t much because I only worked there for five years, but I like knowing that it will start to pay when I am older.

    My husband hasn’t worked for any firms that included a pension, so most of our retirement planning doesn’t include the assumption that we will have any annuity payments except that one pension, and social security. I think he would prefer a lump sum because he is confident in his investing skills, but I like the comfort of knowing that certain payments will just show up in the future. If I base my planning on my grandparents and their siblings, I will defer SS since most lived to 80s/90s. My husband’s family is the opposite, but I still think my DH intends to wait as long as possible to start SS.

    My biggest concern remains our long term care and/or health care expenses. I just got my Amex bill and it was very high. The reason was payments to dentists, oral surgeon etc. I feel like a broken record, but the three of us seem to have unusually high dental expenses and that trend continues every year.

  28. “most of our retirement planning doesn’t include the assumption that we will have any annuity payments except that one pension, and social security.”

    Or any annuities that you purchase.

    “If I base my planning on my grandparents and their siblings, I will defer SS since most lived to 80s/90s. ”

    Just curious, does anyone here not plan to defer collecting SS until 70?

  29. Just curious, does anyone here not plan to defer collecting SS until 70?

    It depends entirely on the state of our health in our mid to late 60s.

  30. Something to ponder:

    Of the 1.4 million men and nearly 1.3 million women who began collecting benefits in 2012, about 1 percent of the men and nearly 2 percent of women were at least 70.

  31. So we’re totebaggers, and one of the things we do well is delay gratification.

    One reason I enjoy this group is because we’re like-minded about many things, and thus your thoughts, experiences, advice, and suggestions are usually quite relevant to me.

  32. We hope to wait as long as possible to start to receive SS, but it really depends on our health in our early 60s.

  33. In our families quite a number of folks lived into their late eighties. Barring anything unforeseen, we have to plan for longer lives. Neither DH nor me has a pension and our plan is to continue to work as long as we can and save. We will most likely hold off on taking SS early. Our mortgage is paid off, no other debt. Once the kids are through college, our expenses should go way down.
    I know of pensioners who lived in the U.K. and on retirement returned to the home country. That pension converted into home country money works out to be quite a bit and allows them to have a very comfortable retirement in the home country.

  34. I’ve seen various hypothetical scenarios for when to start collecting SS, and in the vast majority of cases it’s a better payoff to wait. Now, if there are health issues or if you need the money, then you should start before age 70.

    “Plans have to let you take a 50% survivor or 75% survivor if you’re married. ”

    BenL or someone else may know this, but I believe the spouse is usually required to sign off on any annuity option that does not offer survivor benefits.

  35. “Just curious, does anyone here not plan to defer collecting SS until 70?”

    I always planned to but am rethinking — we are not super-healthy, and it’s fairly likely that at least one of us won’t make it until 80+. So we may take one at 62 and wait until 70 for the other, sort of hedge our bets a little + help with the cashflow in the traveling years. We will also have to look at how claiming may affect our taxes — I am pretty sure our benefits will be taxable, but it may be that claiming at 62, when we have only DH’s pension as regular income, may allow us to pay lower taxes from 62-70 vs. taking both at 70, when we will also need to also start taking RMDs — IOW spreading out the income more across time vs. having a big jump from 2 SS and RMDs at 70 with the associated tax hit from then on.*

    But, really, we’ll run the math and see how we’re doing in another decade — I think our relative health will play a lot into it (right now, I am feeling particularly old, because I injured my shoulder and hip on back-to-back days and so have to take a few days off Crossfit, and that makes me cranky).

    *Obviously we can plan around that with earlier distributions and such. That’s just a level of detail we haven’t gotten to yet, as we’re still @10+ years from that decision, and I assume the tax rules are going to change six times before then anyway.

  36. And, totally off-topic, we had one of those “it’s hard to be a teenager” moments last night. DD has joined the speech team (original oratory), and she decided to do her speech on ADHD (“write what you know,” right?). It was all last-minute, of course, although for a change, it mostly wasn’t her fault (lots of logistical/team issues), and so last night was the first time she got to deliver the speech to her team for feedback. And she was focused — I mean, I had scheduled a dentist visit that afternoon for her (before she joined the team), and she got three cavities filled *without Novocain* so she would be able to do the speech.*

    So have I foreshadowed enough? You know how this ends: it didn’t go well, and she came home sobbing — apparently, it was boring and not funny/personal enough. I think it hurt so much because it was *completely* personal: this is the kid who insists on showing the world a shell of perfection, who cannot admit even the slightest weakness (most common phrase: “I got this”); and yet for this, she really put herself out there and talked about some of the not-so-pretty parts of her own experience. And knowing my kid, what she heard was “your story/experience isn’t good enough,” not just “you need to fix this part of the delivery, and add another joke here.”

    She will be fine, of course; I mean, that’s why you do speech in the first place — to learn how to take constructive criticism, to revise and edit and bounce back, etc. But, man, it’s one of those hurt-your-heart moments. And I couldn’t fix it. I hate that part of parenting.

    *That child is going to rule the world if she puts her mind to it.

  37. I am planning to take SS later, and have DH take it earlier, similar to LFB’s reasoning. We are still wondering what the right retirement age is. It has as much to do with our wanting to feel useful, and our egos linked to working as it does financial issues.

  38. LoB – The words from scripture that help me are “The stone that the builders rejected, has become the cornerstone”.
    Sending hugs to your DD. Teenage years are tough for some kids. I endured years of terribleness.
    Note – I have a few sayings from scripture that I repeat in my head, to get me through difficult situations.

  39. The only point of taking Social Security before 70 if you don’t need it to live on currently is to make sure that you “win” the bet with the gov’t that you will die before the break even age (circa 82). The point of delaying it to 70 and not starting at 66/ 67 – full retirement age, as the article Rhett posted explains, is to “buy” a hugely below market price annuity as longevity insurance. And starting to collect at 62 is almost always a bad idea, for a lot of reasons, and can adversely affect a low earnings history future widow(er). So if “someone you know” plans to sign up at 62, please take good financial advice first.

  40. Everyone born in 1960 or after can’t start taking SS at 62. Regular payment will start at 67 and “early” will be 65.

  41. Nope, I’m wrong, you can still take it at 62, but it remains a bad idea. At 65 you still won’t get “full” benefits.

  42. If you claim at age 70 this year, the maximum benefit is $3,538, or $42,456 a year.

    That ain’t half bad, especially for two totebaggers, many of whom will spend most of their careers above the SS max. Keeping in mind that:

    The national median monthly rate for a one-bedroom unit in an assisted living facility is $3,500, according to the 2014 Cost of Care Survey released in April by Genworth Financial Inc. of Richmond, Virginia.

  43. Rhett – the facilities I toured with parents were very nice but they were dodgy on the total bill. Just felt that they wanted you to sign and then they would tack on charges for this or that. The sales directors got impatient with my mother who was asking all these detailed pricing questions.

  44. Just felt that they wanted you to sign and then they would tack on charges for this or that.

    You bet they will. And the salespeople lie to you outright. AND there’s price fixing to a major degree. I know I bitched about that a few years ago here — the saleschick at the place my mom ended up cheerfully acknowledged that she and her competitors get together at conferences and compare pricing and match each other accordingly. Fuckers. But the free market is wonderful and will solve all our problems and regulation always makes things worse.

  45. RMS – it’s difficult to compare because some places have buy in options, some don’t etc.

  46. @Meme: What about the “one at 62, one at 70” option for comparatively equal earners? IIRC, once one spouse passes, the survivor gets the higher of their own SS or the deceased spouse’s. So if you both have comparable benefits, couldn’t you take one early, delay the second for the maximum time, and then if the second spouse dies first, the first one could switch to survivor’s benefits (and thus get the “claim at 70” benefits instead of the “claim at 62 benefits”? Or is this one of those strategies they outlawed recently?

  47. That’s Green Bank in WV. Even out by Jupiter, if there is so much as a wifi router running, we can detect it:

  48. “what are the chances that a rock kicked out of another star system would be so nicely aimed that it passes closer to the sun than Mercury’s orbit? Well, consider this: This object came from the direction of the constellation Lyra. That small constellation boasts a bright star, Vega (“Contact,” anyone?), that is a mere 25 light-years away. So suppose, for argument’s sake, that Oumuamua is a rock ejected from the Vega system. The chance of it passing so close to the sun is comparable to throwing a pebble and, by accident, hitting a nickel 75 miles away. That’s hard to do, even if you have the arm to throw that far.”

    I kind of wish they’d shown the math. Because I wonder what the odds are if you multiply millions/billions of asteroids by, oh, 4-5 billion years? They mention the “lots of pebbles,” but the way it’s written, it still sounds like “it’s a spaceship!” is more likely.

    Still, fun to speculate.

  49. To answer July’s question, in a pension plan the spouse must consent to anything other than at least 50% survivor annuity. Some 401(k) type plans allow annuities but no consent is required there.
    I got bogged down in details yesterday but the point is ask questions. Don’t just rely on what the plan gives you, a lot of nuances are left out of the plan notices.

  50. That scenario works if you have two equal earners and you are reasonable sure the one who doesn’t claim early is going to die in the early to mid 70s. Then you WIN!! That also assumes that the person who claims at 62 doesn’t plan to work on the side for much pay, or have deferred comp, or certain types of retiree pship distributions , or stock options to cash in. SS is reduced 1 dollar for every 2 of earned income between 62 and full retirement age (66/67). There is a lot better argument for one of you claiming at full retirement age on his/her own record and the other waiting to 70.

  51. Thanks Meme.

    “Win” being relative, of course, given that it requires the spouse to die relatively early. ;-)

  52. That’s my point exactly. Why is it so important to relatively prosperous people who don’t need money at 62 to live on to employ a claiming strategy that minimizes the probability that the gummint will retain at least $1 more cumulatively rather than some other strategy that has more protection against longevity risk?

  53. Fair point. I guess if I think about it, our “best-case personal”/”worst-case financial” scenario is if we both live a long time, which increases the likelihood that one or both of us will need LTC, and also increases the chance of more “down” market events that could bleed the portfolio down if they hit at the wrong time. In that event, having one of us “stuck” at the age-62 payout for all those years would be a noticeable hit.

  54. “The point of delaying it to 70 and not starting at 66/ 67 – full retirement age, as the article Rhett posted explains, is to “buy” a hugely below market price annuity as longevity insurance.”

    And it’s not just any annuity. It’s got COLA adjustments, survivor benefits (although that’s not a big deal for a couple in which both have similar earnings histories), is backed by the full taxing power of the federal government, and is not fully taxed.

  55. For younger Totebaggers, I expect social security amounts over ~$1500/month (average benefit) to be significantly reduced in an effort to make the system more solvent. I don’t think they’ll cut the social security of people with below-average benefits much, if at all. (And I am sufficiently progressive that I think this is the right approach)

  56. “And I am sufficiently progressive that I think this is the right approach”

    I’m not sure.

    As Rhett has pointed out, one reason SS has the support it has is that it’s not means tested and there is some correlation between what you put in and what you get out. It’s not an overt income redistribution plan.

    If I had the ear of a legislator, I’d suggest:

    -Increasing the rate of increase of the income cutoff for paying the tax. I believe it currently is indexed to inflation; I’d suggest something like the current adjustment plus, say, 2%. Removing the cutoff doesn’t seem to have traction; this is the tortoise approach.

    -Start increasing the basis for benefits from 35 years, eventually getting to 40. This will provide an incentive for people to work, and contribute, longer. I’ll hit 35 years of full-time, post-college work well before I retire; there’s currently no SS incentive for me to continue working, and paying FICA, after that.

  57. WCE,

    I think Finn is on the right track.

    The politics are such that It’s highly unlikely that any one group would be hit will all the burden in a obvious way. As Finn said, if you increased the rate of increase in the SS cap by a small amount, while not increasing benefits quite as much for high earners, and increase the incentive to delay taking SS by a little, and move to a chained CPI to calculate the COL adjustments, etc. Then you can close the entire gap without anyone really noticing.

  58. -Start increasing the basis for benefits from 35 years, eventually getting to 40. This will provide an incentive for people to work, and contribute, longer.

    Penalizes SAH parents though, who are disproportionately women.

  59. “Penalizes SAH parents though, who are disproportionately women.”

    Spousal benefits take care of many SAH parents. It will affect the ones who work enough to have their own benefits be larger than spousal benefits.

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