When Should You Take Social Security?

We've debated here several times on when it's the right time to take Social Security -- as early as you can (despite getting less than the total benefits due to you) or once you reach "retirement age" (so you can receive full benefits.) CNN Money recently weighed in on this issue with the following:

Should you start collecting Social Security checks at 62 or should you wait? Go to Met Life's free calculator, answer three questions, and voila: the age at which you'll have the best chance of maximizing your take, plus a clear explanation.

I used the calculator and it was easy (not to mention fun since Snoopy was there.) Here's what it told me:

• If I waited to get Social Security benefits, I would eventually earn more as the higher amount per month caught up with the fact that I'd receive benefits for more months if I started later. (No duh, Sherlock. This is the basis of all the on-going debate about when to take Social Security.)

• My breakeven age was 78. This was new, useful information to me.

• I have a 70% chance of living to be 78. Very, very useful information to have. They also showed me that I have a 50% chance of living into my mid-80s (I think it was 84.) Having this info seems to make my choice clear: wait if I can.

• For specific details, I should talk to a MetLife rep. :-)

Overall, a simple, useful calculator. It's not a one-stop piece to make a final decision, but it can certainly help point you in the right direction.

If you use the calculator, stop back and let me know what you think of it.

Comments

[Aaron]

I'm still in my 30's, so the answer to when I should take Social Security is "ha, ha - I'll never get the chance".

[Homer S]

While I agree with Aaron above, I used the tool and it gave me the same information it fave FMF.

[BigBoy]

It wasn't a bad tool - I need to wait until I'm 78 to break even.

[Al Howard]

Tried the tool. Won't go to my current (not yet retired) age of 65. Highedt setting of 63.
Similar results: 78% of living to 77 (the break-even age), and a 25% cgance of making 92.

[Welath Pilgrim]

This is an excellent tool. The only additional point I'll make is that I can enjoy spending money a lot more pre-78 than post.

SHOW ME THE MONEY BABY!

[Strick]

FMF - I always assumed you left out social security benefits from your retirement calculations from the fear it would not be available in the future (or at least the benefits would be greatly reduced, which seems a fair possibility to plan for). Given this, Why wouldn't you plan to take any and all SS as soon as you can?

[FMF]

Strick --

Good point (taking it early since it may not be around during my entire retirement.)

And, yes, I've set my retirement number assuming that I will have to fund the whole thing myself without SS. So any amount I get from the governmet will be gravy.

[chynalemay]

your 6 articles on the best choices you recently printed are gospel - NOT ay calculator!

[Jim]

The calculator starts at age 40 and I'm still in my 30's. I tested it for age 40 and it told me to wait till age 67. It doesn't ask about spouse at all so I think its missing that important element. Also it doesn't take into consideration your health status either. Are you a smoker, obese, etc will impact your life expectancy considerably.

[Lord]

Limited, since this does not account for any earnings on SS. This may be appropriate if you spend it when you get it, but less so if you invest it until you need it, or equivalently, spend less of your portfolio when you receive it than you would without it. So you have to ask yourself, if you take it early will you spend more early, and if you delay it will you spend less early?

It also fails to incorporate the most important information you have, your personal life expectancy and your personal discount rate. Long life says delay, while a high discount rate says take it early. Some 30% of people have very high personal discount rates and while they may end up with less taking it early, they will value it more. (They probably aren't reading this though.)

[Lord]

BTW, if when you take SS won't affect what you spend, the breakeven age is pushed out to about 85.

[rwh]

My break even age is 76, 50% chance of living past age 84, 25% chance of living past age 91.

I'll take my SS when I think I have enough in all my other savings accounts (retirement and non-retirement) to afford to retire. I'll only take into account the monthly benefit as it factors into my entire income equation.

I find it humorous that so many people feel they can't count on SS, but they are confident they can count on their own savings and investments to fund a retirement. One would think after the two bear markets of this decade, along rising unemployment and potentially higher taxes due to exploding deficits that we wouldn't be so confident in our own ability to save enough.

[david]

I work for SS and I think it will be there for all - it has to be or that means we have no government left and we are a 3rd world nation. What will happen for sure is the percentage of SS payments that will be taxed will be increased and savers which is most people posting here will be unfairly penalized.

One other thing to factor in is none of us want to be destitute in our later years of retirement, right? Thus, no matter what the calculators say I need to live to and whether I think I will make to that year - I PLAN on livin off my savings and pension from 62 to 70 and let my SS payment continue to rise. Thus my guaranteed annuity payment will increase about about 50 percent and I have a much better chance of ENSURING that I have enough money in retirement. I also think this will decrease the taxes I need to pay on my SS payments as the OTHER income be be much less as I will have spent it for 8 years PRIOR to getting SS payments.

This way if I live to 100 years of age - which more and more people will - I will be getting a much bigger check for 30 years than if I had started taking benefits at 62 years of age.

[JimL]

rwh,

There is more confidence, obviously, when one is in control versus not in control. With a balanced portfolio, one is able to weather the storms and reach monetary goals.

[Joel]

We should shut down Socialist programs like Social Security. We need to recognize the system is unsustainable, as the vast hordes of greedy baby-boomers are heading into retirement, without taxing the rest of us into the ground.

Shut it down, use the funds to pay down our debts, cut the spending and get back to the true American way of being responsible enough to take care of ourselves.

[Michael]

I support the idea that I will use my savings and delay SS until I am 70 and use it as a USG guarantee for my end of life years. I would like more discussion about how much income I can earn without forfeiting my SS.

[Kirk Kinder]

It is great to due these breakeven analysis, but the one thing to remember is if you happen to die prematurely you get nothing...nada...zippo. Mortality tables are great, but they look at the aggregate, not individual. Social Security is the one retirement income source that goes away if you die. Your investments remain for heirs, but this source is gone. Sometimes we look at the numbers so much we tend to lose focus on other important issues.