Help a Reader: When Should She Take Social Security Payments?

Here's a comment left on my post titled The Best Age to Start Social Security:

I am trying to decide whether or not to take Social Security in June when I turn 62, or wait until 66. I am financially secure, not wealthy, will have a PA teacher's pension, have some investments to draw on at age 70. I would like to be comfortable now and not have to wait to travel. Also, that money would pay for my health insurance. So, what to do?

I told her I would post it here and ask my readers for their thoughts. So, what do you think she should do?

Comments

[Brian]

I can't really speak to if she SHOULD retire now or wait. But, if she's concerned about HOW MUCH money she'll receive at 62 or 66 or 70, she could check her SS statement. Appearanly, anyone contributing to SS should get a yearly statement which details what she would get at 62, 67 or 70 (assuming you're at that age right now). And if you don't get a statement, you can request one:

http://www.ssa.gov/mystatement/

Hope that helps a little

[CIWOOD]

How long will you live? If your life expectancy is 80+, you would be better waiting and many women in my classes have a life expectancy over 100. You generally receive about 8% more for every year you wait up to 70.

http://moneycentral.msn.com/planning/home.asp
select retirement tab
select life expectancy calculator on lower right

[EMF]

It wasn't clear exactly when she planned to retire. You should not start drawing SS before actually quiting work, because (1) the income could result in extra taxes on the SS benefits and (2) earned income before your normal retirement age of 66 could reduce your SS benefit directly.

Since women usually live longer than men there's a better chance of higher lifetime benefits from waiting.

Also be aware that if your pension is based on work for which SS tax was not withheld ( which is the case for teachers and government employees of some states) then your SS benefits could be reduced by the Windfall Elimination Provision.

Recommend that you visit www.ssa.gov and read up on Social Security and how benefits are computed.

[Lord]

She should delay it until regular retirement if she continues to work. If she is not working, there are two discount rates that are relevant. Early retirement uses a 4% real discount rate and late retirement a 2% real discount rate. If she can do better than a real 4% return, she should take it early, better than a real 2%, take it a regular retirement, and not even 2%, she should take a late retirement. Finally, her personal life expectancy matters. If she doesn't expect to live longer than 85, she should definitely take it early, while if she expects to live much longer, she may consider delaying it, but most are not in a position to enjoy it after 85, so I would not recommend delaying it beyond regular retirement even then.

[Duane Gran]

Meet with a fee-only planner to draft up some scenarios for you. You may pay around a thousand dollars for the information, but it is worth your while. Once you elect one path on taking social security you can't change the decision, so make it an informed choice. There are simply too many variables and too few details on the table here for anyone to make a good faith recommendation.

[Les]

Using the Social Security Online Benefit Calculator (http://www.socialsecurity.gov/planners/calculators.htm) [and assuming that your school system paid into Social Security on your behalf and that you acquired the required number of Social Security credits], you can get a rough calculation of what your monthly benefit payment would be. For example, someone born in June 1945 with current annual earnings of $40,000 would get, in 2007 dollars, a monthly benefit of $827 at age 62 years and one month (in 2007); $1161 at age 66 in 2011; and $1610 at age 70 in 2015. Social Security estimates that the accumulated value of higher benefits (from postponing retirement) will start to exceed the accumulated value of lower benefits (from choosing early retirement) at 75 years and 8 months if you took the benefits at age 62 versus 66; at 78 years and 4 months if you took them at age 62 versus 70; and at 80 years and 4 months if you took them at age 66 versus age 70.

[Lord]

Be wary of SS calculations though. They assume the choice is between work and retirement, not between retirement and deferral or retirement and collecting, and they also don't assume you can afford to invest your money rather than spend it. Actually you can now change your mind afterwards. You just have to repay SS all the money you received with interest and they will reset the clock for you. It wouldn't do any good though if you can't repay them.

[maribeth petery]

Thanks for all the, yet somehow confusing, information. That last one was really news to me. I would be lucky to live to 80 or beyond based only on my family history.. My financial advisor said take it now. I am retiring from teaching with 31 years and a nice PA teachers' pension. I am now 62. I plan to travel and will use it for that and to pay for my health insurance which is not provided for me. I have decided to take the ss now, although waiting until 66 would have given me 480 more dollars per month. Thanks for your advice.

[maribeth petery]

Thanks for all the, yet somehow confusing, information. That last one was really news to me. I would be lucky to live to 80 or beyond based only on my family history.. My financial advisor said take it now. I am retiring from teaching with 31 years and a nice PA teachers' pension. I am now 62. I plan to travel and will use it for that and to pay for my health insurance which is not provided for me. I have decided to take the ss now, although waiting until 66 would have given me 480 more dollars per month. Thanks for your advice.

[Barbara]

I turn 62 next February 27, and I want to retire and take my Soc Sec ASAP. Will I be penalized for working January and February next if my earned income for the whole year exceeds $13,560 even though it was earned in the portion of the year before I turn 62?