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Should you claim your pension early or wait? (www.mpg.de)

submitted 4 weeks ago by Pro@reddthat.com to c/personalfinance@lemmy.ml

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In the U.S., the monthly payments increase the longer one works—researchers have now examined whether delaying retirement is financially worthwhile.

Earlier retirement: Researchers have analyzed data from the United States to examine whether retiring earlier is worthwhile.

Findings: The study shows that the financial risk of delaying retirement particularly affects men and low-income groups in the U.S.

Making the most of it: For sick individuals in the U.S., retiring early can help them receive some of the benefits they paid for—even if they do not have long to live.

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[–] tburkhol@lemmy.world 2 points 4 weeks ago (1 children)

SS is a defined benefit administered (and guaranteed) by an independent agent. Pension is a defined benefit administered by employer (or PBGC). Seems pretty similar to me.

Annuity is a defined contribution disbursed formulaically by a company you hired. The only similarity is the regular payment.

[–] sugar_in_your_tea@sh.itjust.works 0 points 4 weeks ago (1 children)

SS is a defined benefit

It's only defined once you start taking it, until then, all we have are estimates. It's somewhere in the middle of "defined benefit" and "defined contribution."

Pension is a defined benefit administered by employer (or PBGC)

It can be defined benefit or defined contribution, depending on how it's configured. Your benefits are directly calculated based on how much you put in, whereas Social Security benefits taper off the more you put in, and after a certain point you can't pay any more in.

A pension pays out assets it has, Social Security pays out based on policy. A pension can go bankrupt if it's poorly run, Social Security instead operates based on law (which can be changed), which is technically unrelated to tax receipts and fund performance.

They're quite different systems IMO, and the main similarity is the regular payment, hence why I brought up annuities.

[–] tburkhol@lemmy.world 1 points 4 weeks ago (1 children)

The main difference is who bears the risk. For pensions, it's the employer, who has to make extra payments if the pension fund falls behind it projected obligations, or surrender its management to PBGC. That open-ended risk is why most companies have abandoned pensions. For SS, it's the government (although they do have the power to change their legal obligation). For annuities, it's the recipient, who will just get less money if the annuity's investments underperform during the accumulation phase.

[–] sugar_in_your_tea@sh.itjust.works 1 points 4 weeks ago

To me, that's a pretty big difference between each product.