Hi all,
“The sooner the participant elects to receive benefit, the smaller the annual benefit the plan provides, as the participant is expected to receive it for a long time.” (from Linking Pension Liabilities to Assets) I don’t understand it quite well, is there an explanation? Thanks in advance.
Think of an annuity. That’s basically what a pension is. If you retire sooner then that’s more time your benefit base is spread over.
Thx, clear now.
In addition to the factor that googs1484 mentioned, a defined benefit plan is usually based on a formula which would often include the number of years of service that a DB plan member spent at the corporation (usually the longer the years of services, the higher the defined benefit).
Ya that too. There’s a double benefit to delaying retirement. Work longer and build a bigger benefit base that’s paid over less time.