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5. Framing the issue as an annuity purchase decision (as opposed to a break-even analysis)a. With this approach, the value of deferring benefits is the amount of increasedmonthly benefits due to benefit deferral.b. The cost of deferral is the lost payments as result of deferralc. It is possible to determine if the cost is worth the increased benefits by comparingit to the actual price of purchasing an inflation adjusted annuity in that amount.d. In most cases, the “Social Security Annuity” is the cheapest and most effectiveannuity a client can purchase.6. Practical ways to support the loss of Social Security benefits in the retirement budget asa result of deferrala. Workb. Using other assetsc. Eligibility for other Social Security benefitsd. Strategies for those who have already begun benefits7. Social Security and worka. Continuing to work provides income to allow the deferral of Social Security benefitsb. Full-time work can also increase benefits.(1) The increase can be substantial if the worker has fewer than 35 years ofearnings under the Social Security system.(2) Even if thirty-five years of employment, years of higher earnings replacelower ones even for earnings after the full-retirement age.c. Part-time work can also support deferral of benefits(1) There is an uncertain impact on benefits when comparing part-time work tofull-time employment.(2) Planning Point: Use the Social Security calculators available at the SocialSecurity website to determine the impact of additional work on benefits.The detailed calculator that can be downloaded is the most accurate andallows modeling of a number of scenarios.8. Using other assets to bridge the gap until delayed Social Security beginsa. Client retires at age 62 and either elects Social Security benefits or chooses touse other assets for a period of time and defers Social Security benefits.b. One way to look at this issue is the annuity purchase price comparison.c. Another approach is offered by Bill Reichenstein who looks at how long theportfolio will last under each scenario—claiming benefits early and takingwithdrawals steadily from the portfolio or deferring benefits and drawing downmore from the portfolio in the early years and less once Social Security benefitsbegin. (Video: Is it better to defer Social Security and withdraw other financialassets? Littell, Nanigian, Reichenstein)d. Example from article, “Social Security: When to Start Benefits and How toMinimize Longevity Risk,” Reichenstein and Meyer, March 2010 Journal ofFinancial Planning,: Single individual with $700,000 of assets in 401(k) retiring atage 62. A combination of Social Security benefits at age 62 and withdrawals fromthe 401(k) generates $41,700 of after-tax income for 30 years.(1) Deferring Social Security to age 64—now the portfolio lasts to age 91.5(2) Deferring Social Security to age 66—now the portfolio lasts to age 93(3) Deferring Social Security to age 70—the portfolio lasts the longest3.22