The Best Time to Start Social Security

     I'm of an age where I am just becoming eligible to take Social Security. Hence, when to start my Social Security retirement benefit is a subject near and dear to my heart. There are roughly 15 million Baby Boomers in the 62-66 age bracket who currently face the same question. Another 60 million Baby Boomers are following close on our heels, wondering -- should I wait, or should I get it while I can?

     I did a post on the subject, Should You Take Social Security Early? back in December. Basically, for those of us born between 1943 and 1954, our full retirement age is 66. We are eligible to start payments as early as age 62. But there's a penalty. If you start at age 62, your monthly payments will be about 25 percent lower than if you wait until 66. Conversely, if you can delay Social Security until you're 70, you'll enjoy payments 25 percent higher than what you would have gotten if you started at age 66 -- and 75 percent higher than what you would have received at age 62!

     As an example, if you have a consistent work record and made a decent salary, at age 62 you might expect to receive a Social Security benefit of $1500 a month. If you do nothing else except wait until age 70, you'll collect over $2600 a month. You get fewer checks -- because you're not being paid for those eight years -- but it would seem that if you can make it to age 70, you'd be better off in your final years.

     But results, as they say, vary. So every year the government sends an update to you called "Your Social Security Statement," which details your own prospective benefit under various circumstances.

     It seems simple, doesn't it?  But life is complicated. Not all companies keep employees around until they're 66, so a lot of people in their late 50s and early 60s lose their jobs. (Age discrimination? I'm shocked! Shocked!) They might need the money now, and don't have the luxury of devising a strategy to maximize benefits over their lifetime. Also, not everyone works for money. If you rely on a spouse for benefits, things can get complicated, especially if you're divorced.

     Then, remember, Social Security is a government program, so it is ridiculously complicated. Your benefit depends on how long you have worked, how much money you earned, whether you're single, married or divorced, and it seems a hundred other variables. Plus, if as a beneficiary you make over a certain amount of money, your payment will be taxed -- are you surprised that the government gives with one hand, but takes with another?

     The bottom line is:  figuring out how to maximize your payments is virtually impossible. However, you can make some educated guesses. There's an article on yahoo! finance, by Linda Stern of Reuters, that tries to help you puzzle out what's best for you. She consults a couple of experts who analyze the situation. And, of course, they disagree. One argues it's better to start benefits early. The other says you're better off to delay.

     But there are a few rules of thumb:

     Take Social Security early if:

     1) Your income is low and you really need the money now.

     2)  You have a spouse who will be eligible for a larger benefit later on.

     3) You have good reason to believe you will not live into your 80s -- either because you're suffering from a life-shortening disease, or you figure your genes are just not going to get you that far. (I've seen a corollary point of view suggesting that men take Social Security early, and women wait, simply because women tend to live longer than men.)
 
     Delay if:

     1)  You're still working.

     2)  You're healthy, and have a family history of extended longevity.

     3)  You have a large nest egg ... at least $500,000.

     But wait! What if the government changes the rules? A lot of people worry that Congress will soon slash Social Security to help shore up the federal deficit. "Don't let 'the Social Security program going to disappear soon so I should take my benefits ASAP' argument sway you," says Linda Stern. "Even the most hawkish anti-entitlement politicos aren't talking about taking benefits off the table for anyone within 10 years of retirement."

     If the answer is still not clear for you -- as it won't be for most of us -- then take a look at this free retirement planner that will help you figure out your own situation. (Scroll down and click on "Link to Should You Start Social Security Early.") You can plug in your own numbers, and the calculator will give you some details.

     If it helps alleviate anyone's worries, I ran the numbers for myself and found that all my anxieties are for naught. In the long run, at least for me, it doesn't really matter much when I start taking Social Security. No matter what I do, I will have enough money to keep food on the table, and a roof over my head. But it doesn't look as though I'll be planning any grand tours to Europe in this lifetime.