Discussion / Answer 2 questions and comment on 2 students / 200~300 words for answers / need in 8 hours

Question 1:

From Ch. 13.  Identify some of the factors which will help make the decision as to whether to take Social Security early. Risks, are they worth it in your opinion?  Any other options?

Student 1:

A person can choose to retire as early as 62, which is 5 years earlier than the 67 retirement age. When doing so, the person will receive a reduction of benefits, normally 20% to 30% permanently.

There are a couple of factors to consider if you should retire early. The first one is the amount of money you saved for retirement. If you have great investment and a stable income, then you can choose to retire early. If you barely have enough money to live month by month, then you should not retire early. The second factor is your life expectancy. If you are from a family that all live longer, then you can work until you are 67 or even later. If your health is not so good, then you may think of early retirement. The third factor is your spouse. It is complicated and case by case, but the higher your retirement benefits, the higher the survivor benefits you will leave for your spouse. The ideal situation is not to retire early.

Another important factor you should consider is that if you are still working when you decide to take retirement early. If you are working, then your benefits will be deducted based on your income until you reach the full retirement age. So to be safe, do not retire early.

References:

Social security benefits. Retrieved from https://www.ssa.gov/oact/quickcalc/early_late.html (Links to an external site.)

When Should You Take Social Security? Retrieved from https://www.schwab.com/resource-center/insights/content/when-should-you-take-social-security (Links to an external site.)

Question 2:

From Ch. 13. What are the similarities and differences between retirement needs and insurance?

Student 2:

Similarities between retirement needs and insurance are the support for fulfilling financial obligations and the ability to hedge risks. Saving for retirement and buying insurance both requires payments. The savings can be used later either by individuals themselves or by insurance companies to cover expenses. Other the other hand, retirement needs differ from insurance in terms of comprehensiveness. In details, according to Altfest (2017), "calculating retirement needs is a complex process that can involve among other things projections of future returns, inflation rates, and the retirement period, all of which are subject to judgement". In other words, retirement needs take into consideration various aspects and risks in order to select the best saving option for retirement planning goals. However, an insurance policy only protects the insured from a certain type of risk. For example, people who are prone to premature death use health insurance to manage such a risk. Moreover, retirement needs are inherent while insurance usually concentrates on unexpected circumstances.

References:

Altfest, L. J. (2017). Personal financial planning. McGraw-Hill Education.