Economics Homework Help

• The United States has a public pension system known as Social Security, which pays a monthly stipend to retirees. One big decision each retiree must make is when to begin taking payments. An individual can start taking payments as early as age 62 or as late as age 70. As you would expect, the monthly payments are larger for those who start later. The decision to start payments is irrevocable, and it locks in the monthly payment amount for the remainder of the individual’s life.
• “David” was born in 1960, and he can start receiving payments in January 1, 2022. Help David think through the decision of when to start his Social Security payments. To simplify things, assume that:

–Based on his past earnings, he can choose to receive monthly payments of (a) $2100 beginning in 2022, (b) $3000 beginning in 2027, or (c) $3750 beginning in 2030

–If he chooses to receive payments at age 62, assume that he has retired and has no other offsetting sources of income 

–David’s health and family history offer no suggestions that his life expectancy is greater or less than an average American male of his age

• Prepare a decision aide to help David think through this decision. The decision aide can be a PowerPoint slide, a one-page email message, a spreadsheet, or anything else you think will illustrate the key variables and how to structure the decision. Your deliverable should also include your recommendation (in addition to illustrating how to think about the decision). Federal Reserve Chairman Powell says interest rates will stay low for a long time, so don’t worry about discounting. Focus on the uncertainty.
• Further information on the Social Security program is available at www.ssa.gov (Links to an external site.).