Social Security

When to collect Social Security 

Every year, Americans give up thousands of dollars of income by filing for Social Security benefits too early. If you’re anywhere near retirement, or want to help guide your parents, here’s how to think about when to file—a once-in-a-lifetime decision with huge financial consequences.  Bloomberg.com

When will you need the most money, early in your retirement or in your later years?  Once you begin collecting your Social Security that’s it, except for any COLAs, your payment won’t change. And any survivor benefit will not change either.

So why take the lowest Social Security benefit starting at age 62?

For some people it may be a matter of necessity, for many its poor planning. The above article provides some good information on the topic; check out the link.

For those who may see a financial need to begin benefits at age 62, a strategy to consider may be using other assets, even an IRA, in lieu of Social Security collected at age 62 or before normal retirement age or later.

But there are reasons not to wait:

You need the money. Sure, you get a 7 percent return on Social Security if you postpone your benefit, but that only helps if you can afford to wait. It’s like putting money into a savings account. But if you need Social Security to pay rent and buy groceries, then go ahead and start benefits at age 62. You’ve earned it, you need it and it’s available. And by the way, you have plenty of company. The majority of people eligible for Social Security start drawing benefits before full retirement age.

You’re in poor health. A friend of mine just turned 60. He’s got high blood pressure and has already suffered one heart attack. Plus, he has diabetes. He realizes he probably will not survive to age 83, the life expectancy of a typical 60-year-old male. So he intends to start Social Security as soon as he can, at age 62. Unfortunately, he’s betting against his own longevity, but given his medical history, he’s making the smart move. If, for whatever reason, you don’t expect to live into your 80s and 90s, then it makes sense to start your benefits at a younger age.

You’re a financial genius. You don’t have to prove any need to collect Social Security. You don’t even have to be retired. It is perfectly legal to start benefits at age 62 and stash the money in your own private investment account. For most people, this doesn’t make sense, because remember, you’re getting a risk-free 7 percent return from the government for waiting, and you probably can’t do that well by yourself. But if you’re the next Warren Buffett, or have a sure-fire investment opportunity, then there’s a case for taking Social Security early and investing it on your own. Remember, though, you may have to pay income tax on your benefit if you’re still working or if you have other income.

Source: US NEWS Money

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3 replies »

  1. The biggest problem with waiting for a higher benefit check is no one knows how long they will live. If you wait, it will take years to get back the money you would have received from age 62 to 66-$36,000. Getting the bigger check $1000 at 66, you will not get the $36,000 back until age 78. Waiting until age 70 for $1320 check and you will not get the $72,000 back until age 80.5.
    I did the math for me age 62 or age 70 and if I lived to age 85 it would only be an extra $64,000. That is not a lot of money to me, when you look at my total benefit from 62 to 85 is $364,317. I am taking my benefit at age 62 because I am in good health and want to travel with my wife while we are still young enough to really enjoy it. Each person must look at their situation and decide what is the right time for them to take benefits. But for me a bird in the hand is worth two in the bush.

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    • True, but you may think differently when you are 80 and would like the bigger monthly check boosted by COLAs. I took mine at age 66, but since I was still working I invested it all until I fully retired. About that travel; I’m 72 and my wife is 76 and we travel to Europe and about twice a year or so and hopefully will keep going.

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      • I know too many people in heir 70s and 80s who have health problems and cannot travel easily. I also have a $1637 per month military pension that will maybe get the COLA increases. Who knows what will happen to COLAs in the future, the government may do away with them. I have always lived on what ever income I have at the time. You make adjustments, like cutting cable tv and saving $76 per month. I am looking forward to having an extra $1085 per month in 27 months.

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