About this video

• Video Title: Stop Ignoring Your Pension. Do This Instead (Real Math)
• Channel: Retire with Julia, CFP®
• Speakers: Julia LMA
• Duration: 00:15:44

Overview

This video focuses on strategic pension planning for retirees, drawing insights from studying 50 successful retirees. It aims to prevent common mistakes that can diminish pension value or create financial stress during retirement. The video covers optimizing pension benefits in conjunction with Social Security and emphasizes the importance of survivor benefits.

Key takeaways

• Mistake 1: Taking Pension and Social Security Early: Starting these benefits before full retirement age can lead to permanently reduced monthly income, impacting lifestyle and overall retirement success. The video illustrates this with a case study, showing that for Kevin and Lynn, taking their pension immediately was the optimal decision based on their life expectancy and the lack of inflation adjustment.
• Social Security Optimization: The video highlights the importance of a Social Security maximization strategy, recommending specific filing ages for each spouse to ensure higher lifetime benefits. It uses Monte Carlo simulations to demonstrate the success rates of different claiming strategies, emphasizing that delaying benefits generally leads to a higher probability of financial security.
• The "Split Strategy" for Social Security: For married couples, this strategy involves the higher earner delaying Social Security until age 70, while the lower earner claims at age 62. This approach balances immediate income needs with maximizing the survivor benefit for the remaining spouse.
• Mistake 2: Neglecting Survivorship Benefits: Choosing a single-life pension benefit over a joint-and-survivor option can be detrimental to the surviving spouse if the pension was a significant income source. The video warns against "pension max" strategies involving life insurance as a replacement, citing potential issues with insurability and policy costs. A 50% survivorship option is shown to significantly improve a surviving spouse's financial outlook compared to a single-life option.
• Stress Testing Financial Plans: The video advocates for using tools like Monte Carlo simulations to test the robustness of a retirement plan against various market scenarios and life events (like early death), rather than relying solely on break-even analyses, to ensure lifestyle protection.

The "split strategy" for Social Security involves the higher-earning spouse waiting to claim their benefit until age 70, while the lower-earning spouse claims their benefit early at age 62.

This strategy is recommended because it offers several advantages:

• Maximizes the higher earner's benefit: By waiting until age 70, the higher earner receives their maximum possible monthly benefit.
• Provides income for the lower earner: The lower earner can access some income earlier by claiming at age 62.
• Increases the survivor benefit: When one spouse passes away, the surviving spouse receives the higher of the two benefits. By delaying the higher earner's benefit, the potential survivor benefit is significantly increased, providing greater financial security for the surviving spouse.
• Improves overall plan success rate: The video's analysis showed that this strategy significantly increases the chances of a successful retirement plan, especially when considering longevity.