You're coming up on 62 years old, you've worked hard and paid
Social Security taxes for years. On top of that, your family
doesn't have a very good record of longevity, so you figure
you'll retire now and enjoy life and a c
while you still have your health.
But before you begin receiving Social Security benefits, you
may want to consider the following: Would you be better off
retiring early and receiving smaller monthly payments, or
retiring later and receiving larger monthly payments?
The answer could be worth tens of thousands of dollars.
But deciding whether to retire at 62, or at the full
retirement age of between 65 and 67, or at the maximum age of 70,
depends on a wide range of factors. These include your current
and future cash needs, your health and family longevity, future
income expectations and your marital status.
"If you find your health is not strong and you're single,
maybe you should turn it (Social Security benefits) on sooner,"
said Joshua Mellberg, president of J.D. Mellberg Financial
in Tucson, Ariz., which offers clients a wide array of retirement
products and services.
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But it's important to know that the amount you receive when
you start taking benefits sets the baseline for the benefits
you'll get for the rest of your life.
Those who start receiving Social Security checks at age 62
will receive lower monthly payments for a longer period of time,
but they'll forego increases of about 7% to 8% every year until
they reach the maximum retirement age of 70. Those increases,
plus annual cost-of-living adjustments, can significantly boost
annual Social Security income for those who wait.
"If you wait until 70, your benefit could go up about 70%"
compared with if you starting taking benefits at 62, said Judith
Ward, senior financial planner and vice president of
T. Rowe Price
) Investment Services. "If you still plan to work, we would
suggest people wait until their full retirement age or older,"
Brett King, senior vice president of investments for Elite
Financial Associates in Tampa, Fla., said health, job and other
factors could prevent some people from delaying retirement.
Otherwise, he agreed that it's best to wait as long as possible,
because the increase in benefits you would get each year are hard
to beat. "There's nothing out there that guarantees you an 8%
return," he said.
Meanwhile, Ward said married couples should plan for
retirement jointly rather than independently, because the
surviving spouse will get only one check after their partner
dies. Since Social Security benefits are based on earnings
averaged over most of a worker's lifetime, it makes more sense
for the highest-earning spouse to wait as long as possible before
"It's a good idea to maximize that check," she said, adding
that wives tend to outlive their husbands and may be dependent on
that income when the husband passes away.
The Social Security Administration sends a yearly statement to
everyone age 25 or older who has paid Social Security taxes and
has not yet received benefits. You can go to www.ssa.gov to set
up an account, look up your work history and use a
to view your estimated benefits at age 62, at the full retirement
age and at age 70.
Those nearing retirement should also consider that life
expectancy has been increasing due to advances in medicine. The
average 65-year-old today can expect to live well into their 80s.
About 1 out of every 4 will live past age 90, and
1 out of 10 will live past 95, the Social Security
"Life expectancy is much longer than it was," Mellberg said.
"The 70s are the new 50s."
Meanwhile, those who served in the military or held another
job that paid a pension but didn't pay Social Security taxes
should check on what benefits may be available to them.
The Social Security Administration warns that by 2034 the
payroll taxes collected will be enough to pay only about 79 cents
for each dollar of scheduled benefits.
Experts said they expect the
Social Security system will survive
, but changes will have to be made to make it more sustainable.
That could result in reduced benefits or higher taxes, which are
among many other factors to consider in deciding when to start
taking Social Security payments.
"Given the deficits in Social Security and Medicare, you have
to think about the likelihood of taxes going up," Mellberg said.
"You have to think of maintaining the same purchasing power" that
you had prior to retiring.