The “Simple” Social Security Formula
I was excited to read that Prof.
Laurence Kotlikoff had put together a simple formula for deciding when to claim
Social Security retirement benefits. Prof. Kotlikoff is one of the country’s
top experts on consumer finance and I thought he had found the Holy Grail for
one of the most difficult problems in retirement planning. It was disappointing
to finally see his “simple formula.” After making some simplifying assumptions,
he boils his formula down to 9 variables.
B(a) = PIA(a) x (1 – e(n)) x (1 + d(n)) x Z(a) + max((.5 x PIA*(a) –
PIA(a) x (1+d(n))) x E(a), 0) x (1- u(a,q,n,m)) x D(a)
Here’s the link to the complete article in a recent edition
of Forbes Magazine:
http://www.forbes.com/sites/kotlikoff/2012/07/17/when-should-i-take-social-security-a-simple-formula/
Frequently I run across people
who think that personal finance is easy and simple and that reading a few
magazines or newsletters and catching an occasional cable television show on
the markets will give them all the information they need. I don’t claim to have
all the answers but if you’d like to tackle that formula together, give me a
call.