Chapter

Rethinking Social Security Claiming in a 401(k) World

James I. Mahaney and Peter C. Carlson

in Recalibrating Retirement Spending and Saving

Published in print September 2008 | ISBN: 9780199549108
Published online January 2009 | e-ISBN: 9780191720734 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199549108.003.0007
Rethinking Social Security Claiming in a 401(k) World

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Previous research has failed to recognize critical factors that greatly impact the discussion on when it is most beneficial to start Social Security retirement benefits. This chapter shows that the effect of taxes can have a dramatic effect on the financial security of retirees, yet the taxation caused by IRA withdrawals and the interaction with Social Security has been largely misunderstood. In addition, changes made under the Senior Citizens' Freedom to Work Act of 2000 make delaying Social Security for married couples much more favorable. This chapter also illustrates how the traditional approach of starting Social Security benefits early and deriving income from stock and bond mutual funds is expected to under-perform a strategy of taking income from personal retirement assets first, followed by later and higher benefits from Social Security.

Keywords: cost-of-living-adjustments; expense risk; tax risk; retirement strategy; financial security; worker benefit; spousal benefit

Chapter.  11893 words. 

Subjects: Pensions

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