Tuesday, January 29, 2008

Taking Social Security

When should you take social security? An article in US News explains the difference between taking SS early and late. Right now people are allowed to take social security at age 62 (early) or normal (66), or late (70). People can see their eligibility by looking at this SS page. Currently the age I'd need to be to get full benefits is 67, but I likely see that being pushed to 70 by the time I retire.

The article says people should delay taking SS because every year you wait, your benefit increases by 7%. That means if your investments aren't making 7%, you should use them up first then take SS. This is a good point.

The article also addresses how long you will live as being a deciding factor. According to the SS website the "breakeven point" is 77 years old if you wait until normal retirement age (66) or 80 years old if you wait until 70 to start collecting SS. So life expectancy does play a role in this decision.

Another key factor I think downplayed in the article is how long you will be working for. The article mentions that working part-time could cause a higher income and it would not be worth taking SS.

But I wonder, how many people have enough to really retire at 62 even with SS? What sort of medical insurance will they have until Medicare kicks in at 65? Many people nearing retirement age lack sufficient funds to retire.

Thus I wonder if retirement any early than 65 is even possible for most people? Thus it makes no sense to draw on SS while still working because combined with their working income, most people will just be paying SS back in taxes.

So consider this, unless you are able to fund your retirement completely at 62 without SS, I would not think about taking SS until your "normal" retirement age.


I'm Grace. said...

I wrote about this a week or so ago. Apparently the number of baby boomers taking their Social Security at age 62 is right around 50%. This strikes me as an amazingly high figure.

Jim ~ mydebtblog.com said...

I would like the option to opt out of the social insecurity system. Hopefully this broken system goes away sooner than politicians pretending to fix it every election year. It is my intention to take care of myself, and I feel this system will retire long before I do.

Anonymous said...

I thought I read an article that said married women should take the early SS payment at 62 because they would likely outlive their spouse and then get the 'bump up' SS payment of their husband's SS benefit once the husband passed away. I am positive I will outlive my spouse if we go based on genetic medical history.

Living Almost Large said...

Problem is that can you afford to retire at 62 without medical insurance until Medicare at 65 kicks in? If you can then go for it at 62, especially if you think your husband will die before 77.

However if your husband lives longer than 77, then you're behind since you won't get the bump up until he dies.

Also if you can't live on SS alone and have little assets to pay for medical insurance, and need to work to supplement your income, you'll be better off not taking SS until 65+.