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A sixty-year-old widow is considering claiming her social security widow benefit now. The primary insurance amount (PIA) from her deceased spouse is $15,000. If she claims them now, she will receive only 72 percent of her PIA for the rest of her life. If she claims her benefits at age 65, she will receive 100 percent of her PIA for the rest of her life. Suppose that her life expectancy is 80.
a. What is the present discounted value of her benefits when claiming at either age 60 or age 65? At what age should she claim her benefits?
b. Suppose now that her life expectancy is longer. How would it change your recommendation in part a?
c. If she expected to get remarried at age 60, how might your answer change? Will her remarriage affect her benefits anyway?