capemaydiamond wrote: ↑Thu Dec 06, 2018 9:27 pm

Mike, would you explain in simple terms, maybe give some examples, of the difference between solving for max PV vs solving for longevity risk? What are some examples where choosing the recommended strategy (ie largest PV) would not get you the best in terms of longevity? Much of this discussion is over my head and I don't need to understand on such a deep level. Just need to know how to think about what your calculator is telling me vs wanting the best solution for longevity risk.

There is no such thing as "solving for longevity risk" per se. Longevity risk is the risk of living a very long time. And there's no real end-cap on it, if we aren't considering probabilities.

In other words, with respect to minimizing longevity risk, the optimal solution is always for each person to max out their benefit fully (i.e., waiting until 70 to file for retirement, or waiting until FRA to file for spousal). Because in a live-a-super-duper-long-time scenario, the highest benefit works out best (because you'd be collecting it for such a long time).

A probability-weighted PV calculation (such as that done by this calculator) considers the

*probability* of living for such a long time. So, for example, the "both spouses live until 110" scenario is included, but it gets very little weight in the calculation, because it's so unlikely.

capemaydiamond wrote: ↑Thu Dec 06, 2018 9:27 pm

FWIW, I am 63 and my spouse is almost 66. Your calculator says our best strategy is for her to file at 67 and for me to wait until 70. I am the higher earner. We also tried her filing at 66 and me at 70. The PV difference is only $580 less. But her annual payment would be almost $1000 less. Are one or both of those factors why the best strategy is for her to wait a year until age 67? Thanks.

The decision for the lower earner typically isn't nearly as impactful as the decision for the higher earner. The reason it's saying for her to wait until 67 is simply, "because that's what happens to give the highest probability-weighted present value." But as you noticed, varying her filing age doesn't make a dramatic difference. (That is, the higher benefit at 67 is almost offset by the fact that it would be collected for slightly fewer months.)