longevity

Social Security retirement benefits can start any time between age 62 and 70, and when you start permanently sets the size of every check. Claim at the earliest age, 62, and your benefit is cut by roughly 30% for life; wait past your full retirement age (66–67 for today's retirees) and it grows by about 8% for each year you delay, up to 70 — a benefit at 70 that is around 76% larger than the one at 62. That is the whole machine: smaller checks for longer, or bigger checks for fewer years. Because the program raises every benefit by the same cost-of-living adjustment, the comparison is clean, and it resolves into a single number — the break-even age, where the total dollars collected by an early claimer and a late claimer cross. Live past it and waiting wins; pass before it and claiming early wins. With today's rules the crossover typically lands in the late 70s to early 80s, which turns the decision into a bet on your own longevity: your health, your family history, and the income you'd need in the meantime. Two things tilt it. First, money: if you'd actually bank and invest every early check, the early claimer's head start compounds and pushes the break-even later — sometimes off the table entirely. Few people invest all of it, so this matters most for those who don't need the money to live on. Second, marriage: a surviving spouse keeps the larger of the two benefits, so delaying the higher earner's check buys lifelong protection for whoever lives longer. The simulator races the cumulative benefits of claiming at 62, at full retirement age, and at 70, marks the break-even, and shows where you'd stand at the age you expect to reach. The durable lesson is that there is no universally 'right' age — only a break-even and a bet — but delaying is the cheapest longevity insurance available, and claiming early is defensible mainly when you need the cash now or have real reason to doubt you'll reach the crossover.

An income annuity is the mirror image of a savings account: instead of putting money in over time, you hand an insurance company a lump sum and they hand you a fixed paycheck for the rest of your life. The product solves a problem no spreadsheet can — you don't know how long you'll live, so you don't know how thin to slice your savings. Draw too much and you risk running out; draw too little and you die rich and underspent. A life annuity removes that guess: the income is guaranteed for as long as you breathe. It can pay you MORE each year than you could safely withdraw from the same money yourself, and the reason is mortality credits — the pool of buyers who die early subsidizes the ones who live long, so the survivors earn a return no bond can match. The trade-off is real and permanent: once you annuitize, the lump sum is gone. You give up access to the principal, the flexibility to change your mind, and the estate you'd otherwise leave behind. So the decision turns on a single gamble. If you die before your own money would have run out, keeping it invested wins — you'd have drawn the same income and still left an inheritance. If you live past that point, the annuity wins — it keeps paying while a self-managed pot would be empty. The break-even is the age your savings would have hit zero. Annuities earn their keep only when their payout rate clears what your money can safely earn; when interest rates are low and you're young, the insurer's cut and your long life expectancy make self-managing the better bet. This lesson models a simple single-premium immediate annuity — the cleanest version — and leaves aside riders, inflation adjustments, and the fees that make fancier annuities a far worse deal.