July 15, 2010

by Russell Bucklew, CFP®

Many people today are concerned that they will outlive their money. A common question of baby boomer retirees is:  When should I begin collecting Social Security – at age 62, 66, or 70? Waiting until age 70 to begin receiving benefits could result in receiving up to 8% more in monthly payments.

One should consider these four key factors when determining the best time to begin receiving benefits:

1.  Life Expectancy
Americans are living longer and this trend is expected to continue. If you are in poor health or do not expect to live to the average life expectancy (78 years), you may decide to take distributions at age 62. If you anticipate living beyond the average life expectancy, delaying Social Security until age 70 may be more beneficial.

2.  Cash Flow
If you are unable to continue working and need the benefits for daily living expenses, taking Social Security at an earlier age may be the best choice.

3.  Working While Collecting
You can continue to work while you collect benefits, but if you take Social Security before full retirement age, your payments may be reduced if you earn more than the annual limit ($14,160 in 2010). Once you reach full retirement age, you can earn unlimited income without any reduction of benefits.  Rarely does it make sense to collect benefits early while you are still working.

4.  You and Your Spouse
Married couples have many options. At full retirement age, a lower-earning spouse can either take their own benefit or take up to 50% of their spouse’s benefits. Married couples should also consider the impact of starting benefits at different times.

These are just a few examples, and determining when to begin to receive Social Security can be difficult.  We are here to assist you with that decision.