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QUESTION:

Should I draw my Social Security benefits at age 62 and take a smaller benefit, or wait until my maximum retirement age to get the larger benefit.
Wondering



ASK YOU MONEY'S ROSEMARIE BOYD ANSWERS:

Dear Wondering: 

Although this may appear to be a simple question, the answer is not simple.   Let me start by giving a very general answer, and follow up with specific things to consider when making the decision.

In general, you should take the benefit as early as possible.  There are several reasons for this.  First, it can be shown that, by waiting and taking the full benefit at a later time, it takes approximately eleven years to make up the benefit amount, which you did not receive because you waited.

Secondly, we never know how long we will live.  Suppose you decide to wait until your full retirement age, let’s say age 66.  Should you die prematurely, and believe me as a planner I have seen this happen more often than I would care to think about, you will never have received a benefit even though you have contributed for most of your working life.  I guess this is the “bird in hand” theory!  Why let the government keep any more of your hard earned money than they have a right to keep.

Other things to consider in making this decision:

1.       It has been shown that, for most of us, the first ten years after retirement, tend to be the highest spending years.  This is the time when we are in good health, have a lot of energy and a great desire to do all the things we did not have time to do while we were working.  Once we enter the second decade of retirement several things occur; first, we have pretty much seen all that we have wanted to see, and done all the stuff we wanted to do.  At this point, the focus tends to shift from travel to family and, as such, our expenses tend to decrease.

2.       Second, our health and energy levels tend to deteriorate as we get older.  This is particularly true after the first ten years.  Again, this results in our not traveling as much and hence spending less.  Of course medical costs are always an issue during retirement.

3.       Third, If you are planning on continuing to work after you start taking Social Security and you are less than your Normal Retirement Age, your benefit will be reduce if you exceed certain income limits set by Social Security.

4.       One final thought!  If one is wealthy and has plenty of cash flow, and significant assets, the decision really comes down to playing the odds.  Do we want to take a chance that we will live long enough to collect at a later time, or do we subscribe to the “bird in hand” philosophy?

As with any of these major financial decisions, it is wise not to listen to well-meaning friends.  This is the time to seek the assistance of a good Financial Planner.  It will be well worth the fee you will pay for these services.  After all, this is a lifetime decision which cannot be undone once made.

Thanks for your question.  Rosemarie A. Boyd, CFP

Most Recent First Oldest First Most Popular First

jemsmommy My ex-husband died 3 1/2 years ago. When I turn 60 I can start collecting HIS social security. How does that affect my social security when I retire?
2 like this.
Wed Dec 29, 2010, 1:37:13 PM EST

rhoni315 jens mommy, i was told that if you were married to your husband for 10 years or more, even if divorced, you can collect his social security benefits when you turn 65. good luck, my husband passed 5 years ago, i'm 54 next week, and that's what i plan to do. his ex-wife just turned 65, they were married for 25 years. we should both be able to collect. good luck!
Thu Mar 10, 2011, 10:27:54 AM EST

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