Question

Richard is a successful executive at a large company with headquarters in Houston, Texas. He celebrated his 58th birthday in the current year. Richard has worked with the company for more than 20 years. As a result, he has significant savings accumulated as well as a company pension. He is considering retiring from employment early at age 60. Even if he retires early, he can continue the company paid health insurance as a retiree until he qualifies for Medicare at age 65. He would like to evaluate his options for taking Social Security retirement benefits at age 62, at FRA, or at age 70. Based on his earning history, his Social Security statement shows that he will receive $2,850 per month at FRA. Inflation is expected to be 2.5% and his life expectancy is 93. He has asked you to do an analysis of differences in his monthly cash flow from Social Security at each age. If you were Richard's financial advisor, would you recommend taking benefits at age 62, FRA, or 70?

Answer 1

• When to take Social Security benefits in a way that is best for Mr. Richard is at the age of 70 only, because if he retires at the age of 60 also he can continue in the scheme of Medicare at the age of 65.
• since life expectancy is 93 he will get regular income upto retirement.
• If he take Social Security benefits at the age of 62, his cashflows will be as follows

  age	Cash flow	Discounted income @2.5%(100/102.5)*cashflow
  62	=2850*12=$34200	$33365

• What pension distribution choices are right for you
• If an annuity is a suitable investment for you
• Which accounts to take withdrawals from each year, and in what amounts, to minimize the retirement taxes you will pay
• What amount of retirement income you could reasonably expect to have

FRA may offer no upfront tax deduction but withdrawals will be tax-free.

• What withdrawal rate is appropriate when taking money from a traditional portfolio
• How much of your money should be in guaranteed investments
• What types of taxable income your investments will generate
• How you can rearrange investments to reduce taxable income in retirement
• Whether you should leave your money in your company plan or roll it into an IRA account
• If you should pay off your mortgage prior to or during retirement
• If a reverse mortgage is a good option for you
• If you need long-term care insurance