Q. I’m a 62-year-old black man, eligible for early Social Security. After working 42 years I was recently downsized. I currently have roughly $140,000 in my 401(k) account. We have no mortgage on our home. My wife receives $8,000 a year in early Social Security benefits. I have an additional $15,000 to $18,000 in income, after taxes, from a pension plan.
A. According to the U. S. Life Tables, black men have a significant life expectancy disadvantage at any age when compared to white men, white women or black women. At age 62, for instance, a black man has an expectancy of 16.9 years. That's 2.4 years, or 12.4 percent, less than the 19.3 -year life expectancy of a white man at that age.
But the news isn't all bad.
First, the longer you live, the smaller the expectancy gap in both years and percent. By age 70, for instance, a black man can expect to live an additional 12.4 years. That's 1.3 years, or 9.5 percent less than the 13.7-year expectancy of a white man at that age.
Second, even though your life expectancy is lower than others, it is still long enough that you can benefit from deferring Social Security benefits. The benefit gain isn't as much of a slam dunk as it is for, say, white women, but as long as your life expectancy is equal to, or greater than, the 12- to 13- year payback period, you will increase your lifetime income.
At 62 with a 16.9-year expectancy, deferral is a good bet for you. At 66 with a 14.6-year expectancy, it is still a good bet because you're likely to exceed the payback period by about 2 years. Only at age 70, with a 12.4-year expectancy, does it become an even bet.
There may be another reason for you to defer taking benefits. If your earnings record shows more earnings than your wife's and your wife is younger than you are, she will benefit from your deferral even if you don't live as long because her retirement benefit will be adjusted upward upon your death.
Your decision, of course, will always be a gamble--- you could be hit by a bus the day after you start taking benefits. But if deferring Social Security benefits were a table game in a casino, it would be one of the better games to play because you've got a good chance of "beating the house." In your shoes, I'd definitely defer until full retirement age---66--- but I probably wouldn't defer until age 70.
Many readers argue about this idea. They say, "Take the money and run." They like to assume that they will die young rather than old. They also assume that they will enjoy spending the money much more at age 62 than at age 70 or age 80. Since I am not 70 or 80, I can't argue from experience. But at age 68 I have yet to notice the decline in pleasure of living that I assumed was inevitable when I was 20, 30, and 40. Trust me: It’s still fun to spend money.
Q. Recently, you had an article on closed-end mutual funds and discounts. How is the discount on a mutual fund determined?---G.M., by email from Dallas
A. Closed-end funds issue a fixed number of shares that trade on an exchange. If you multiply the number of shares by the share price, you know what the total market capitalization of the fund is. That number can be smaller than, or greater than, the market value of the securities in the actual portfolio. One easy way to learn the size of the discount or premium on a fund is to visit www.etfconnect.com. There, you can examine the discounts or premiums on both traditional closed-end funds and ETFs--- exchange-traded index funds.