Mon, 28 September 2009
One of the more common questions asked of me is “should I take Social Security early?”. The questioner is referring to the ability to take Social Security as early as age 62, rather than waiting till the full time retirement age of 65. (By the way that age gradually increases for those born after 1937 until it reaches age 67 for those born 1960 or later.) Taking early Social Security reduces your monthly payment by ½ of 1 percent for the number of months before age 65 you start those checks coming. If you enroll at age 62 you will get roughly 75% of what you would receive at age 65. Ok, those are the basics. So, what’s the answer?
Well, it depends. There isn’t a “one size fits all” solution here. But let’s analyze this a bit. One consideration is going to be, “How long do I think I will live and what is my break even point?” For example, if I wait until age 65 to take my benefit how long will I need to live before I come out ahead by giving up a lesser benefit at an earlier age? That may also be impacted by what I do with the money if I take it early. If I have sufficient other income and I invest the Social Security that will affect the calculation.
But, wait. That’s not the only consideration. If I am still working when I take an early benefit I can lose some of that Social Security if my income exceeds a certain level (this changes from year to year). And, what about my spouse? When one spouse dies, the surviving spouse is entitled to receive the larger of the two checks. So that may work into this as well.
As you can see, there are many things to consider. There is a certain amount of guesswork involved as well. The best answer I can give, however, is to consult with your professional advisors – financial, tax and elder law – to run some numbers. What is best for you will most likely not be best for the person seated next to you. There are just too many variables for there to be one right answer. But, one thing I can unequivocally say is that you should “run the numbers” before you reach age 62. It might be right for you and you wouldn’t want to pass up that opportunity if it makes financial sense.
Category:Long term care planning -- posted at: 6:00am EST