Expert: Allen - 4/30/2010

Question
I AM SINGLE AND 60. I HAVE A CHOICE OF RECEIVEING A MONTHLY PENSION  FOR LIFE OR GOING FOR THE SOCIAL SECURITY PENSION OPTION. WHICH MEANS I WOULD GET A PENSION AND A PART OF SS NOW. WHEN I TURNED 66 I WOULD GET MY SS AND MY PENSION WOULD BE GREATLY REDUCED. DON'T KNOW WHAT TO DO.

Answer
Unfortunately, there's no simple answer to your question.

I believe the choices you are being offered are:
1. A certain amount for life, or
2. An increased amount for the next 6 years and then a reduced amount thereafter.

Under option 1 your total retirement income (pension + Social Security) will increase when you reach age 66. Under option 2 you will receive the same amount of income as long as you live; the pension is larger now to make up for the fact that you will be receiving Social Security checks when you reach age 66.

From an actuarial point of view, the value of the two pensions is the same. That means, based on average life expectancy, the value of the income stream is the same under each of the two alternatives.

There are anumber of factors that should lean you towards one of the two alternatives;
1. Which alternative is more valuable depends on how long you will live, Obviously, you don't know the answer to this question. However, if your family history indicates you will live a long time, you're better off with the first option. On the other hand, if family history indicates a relatively shoirt life spon, you are better off getting as much as possible now.
2. Do you need the money now. If you do, then you're probably better off taking as much as possible now.
3. On the other hand if you can afford to wait, you're better off taking the first option and then getting a bump in your income when you reach age 66.

Sorry that I can't give you a more definitive answer. I can only state that if I had to make the decision, I would choose option 1. I would look forward to the bump in income when I start receiving Social Security benefits.