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Taking Social Security, Or Waiting

September 26th, 2011 at 01:53 pm

If you are in your 40s or 50s, and already have your 62nd birthday highlighted on the calendar with a big smiley face, hereís some advice: check your math first.

Age 62 is when Social Security payments first become available to most of us. However, full benefits donít kick in until 66 for current retirees, and 67 if you were born after 1959. There are two reasons to consider waiting. One, taking the money now puts less in your pocket later. Letís take a 62-year-old woman who retires this year and qualifies for $9,000 annually. She will get $12,000 if she waits until her full retirement age of 66, and $15,840 if she waits until 70. If our 62-year-old takes the money now, her grand total will be greater for about 12 years than if she waited until 66. At age 74 in this case, she begins to fall behind. Keep in mind that Social Security is adjusted for inflation annually.

Secondly, if you remain in the workforce between 62 and your full retirement age, your income may take a big chunk out of Social Security. If our same 62-year-old takes Social Security but continues working, she could earn $14,160 from her job this year and still keep her $9,000 in Social Security payouts. For every $2 she earns above $14,160, however, she forfeits $1 of her Social Security until she hits full retirement age.

Patience may be a virtue, but there are reasons why more than 70% of retirees take Social Security before their full retirement age. Some really need the money. Some figure that Social Security benefits will dwindle, given the nationís debt load. And some figure they might not live long enough to enjoy the money in their mid-70s, when waiting finally pays off.

ďChoosing when to retire is an important decision, but itís also a personal choice and one you should carefully consider,Ē says Martina Dunkerson, Social Security Administration public affairs specialist for southern Indiana. She suggests you go to the Social Security website at http://www.socialsecurity.gov/pubs/10147.html to help make that big decision: whether the smiley face stays or goes.

4 Responses to “Taking Social Security, Or Waiting”

  1. Nika Says:

    You can also pay back social security and re-set your clock that way. That is one important thing people should know.

  2. PatientSaver Says:

    A big part of the equation for many people is their relative health. If you feel you are in poor health generally, it may make more sense to start collecting early.

    Nika is referring to a "do-over" of sorts. If you sacrificed a higher monthly SS benefit for immediate payments, you may regret the decision years later. Until late last year, when the SSA eliminated this option, you could opt to pay back all the SS payments you received years later, so that you could then qualify for the higher monthly benefits.

    If you're interested to learn why the SSA ended this option, you can read about it here in Forbes:
    http://www.forbes.com/sites/janetnovack/2010/12/08/social-security-administration-kills-do-over-to-boost-benefits/

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  4. Jerry Says:

    I didn't know that about the changes in payment based on when you take advantage of the Social Security. I guess it will be an individual decision based on the beliefs about Social Security in general and where its long term prospects will lead, as well as the health of the individual, as noted above. I don't think that there is much insurance that it can last as long as the fed keeps borrowing against it, etc.
    Jerry

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