Discussant: W. Jean Kwon , Ph.D., CPCU School of Risk Management St. John’s University

1. Valuing the Longevity Insurance Acquired by Delayed Claiming of Social SecurityBy Wei Sun and Anthony Webb Discussant: W. Jean Kwon, Ph.D., CPCU School of Risk Management St. John’s University Kwonw@stjohns.edu http://facpub.stjohns.edu/~kwonw/

2. Research Contribution • Treatment of delaying claiming Social Security income as an option to purchase additional annuity • To generate an optimal return, married couples, for example, may retire between 67 and 70 years of age • Calculation of the optimal age spread of the couple based on • Population age mortality risk • The level of risk aversion, and • Retirement time preference

3. Research Contribution • Calculation of Social Security Equivalent Income • To estimate the required increase in benefit from the delay to be equally well off as the case of retiring at an optimal age • Socio-economic factors (i.e., race-education) have little effect on optimal claiming ages. • An effective tool for people, especially those near retirement, to fine tune their retirement plan

4. Suggestion for Research Extension • Modification of initial wealth assumption • The authors assume that people retire with wealth at EPV (Social Security income). However, they also find that less 50% of the retirees have sufficient financial assets to fund consumption. • High-income retirees may subject to higher income tax rates than low-income retirees. • Retirement income replacement ratios vary from 94% (at the $20,000 salary level) to about 78% (at the $60,000~90,000 level).* • Possibly different decision-making (optional retirement age) matrix for the persons that are not fully funded • Variation of λ • What if the surviving spouse’s consumption need equals the deceased’s (λ = 1)? 2008 GSU/Aon RETIREE Project; A case of single-wage-earner-married couples