Tidbits of Information…….

 

When should you start taking Social

 Security??? 

Many of us are eager to start collecting social security benefits as soon as we reach age 62…..but is it the right thing to do?  The answer is maybe yes, maybe no.  It really depends on the individual and your circumstances.

Some financial advisors advise waiting until you reach full retirement age before collecting your social security benefit because your benefit is reduced when you collect early.  The reduction depends on when you were born.

As an example, if you were born in 1945 and you’re entitled to $1000 a month at full retirement (age 66 in this example), at age 62 your benefit will be cut by 25% or to $750 per  month ($9000 per year).  It might pay off in the long run-- even though it is a steep reduction.

 Let’s examine the above example a little closer.  If you start collecting at 62, you will receive 48 more months of checks than someone who waits until full retirement age.  So if you live until age 75, you will have received 13 years of checks or a net to you of $117,000.  If you had waited until the age of  66 to collect your full benefit, you would only receive nine years of  checks for a total of $108,000.

But the longer you live, the less it pays for you to start collecting early.   If you come from a history of longevity, you are apt to make up the money over time.  In this example, if you start collecting your $750 a month and live to age 90, you will get a total of $252,000.  If you’d waited until age 66, you’d get $288,000.  In that case, waiting made more sense.   None of us can predict how long we’ll live, but we can make an educated guess based on our health and family history.

 There are a couple of other things to take into consideration.  If you are currently earning more than you ever have in the past, you might consider waiting because Social Security benefits are based on your 35 highest earning years.

 Also, if you are continuing to work past age 62, your earnings are capped at $12,960 (in 2007) or you will lose a hefty  portion of your benefit.  For every two dollars you earn above that cap, your benefits are reduced by a dollar.  At full retirement age, your benefit kicks back regardless of your earnings.