|The right time to start drawing
Social Security benefits
"Say you're 62, and you're going to continue
working for one more year. If I already have 35 years at the maximum,
that additional year is not going to increase my base at all,"
Carney explains. "However, if I only have 34 years in, even
if I only make $10,000 this year, that is actually going to increase
my base, as well as increase my dollar amount, because I will be
a year older before I begin drawing."
Oh, and about those milestone ages on your statement:
Age 62 is the minimum age at which anyone can draw
Social Security retirement, though we sometimes confuse it with
59½, which is the minimum age you may tap into many IRAs
and retirement accounts without penalty.
Age 65, 66 or 67, depending on your birth date, is
the age at which you can claim full
retirement benefit amounts.
Age 70 is the maximum age for purposes of estimating
Social Security benefits.
Actual benefit amounts available to you between these
ages are calculated on a monthly basis. You can get very precise
estimates by using the detailed calculator,
at the Social Security Administration's easy-to-use Web site, www.socialsecurity.gov.
The Vegas factor
This brings us to the Vegas factor: your estimated benefits, listed
two of your statement. A typical baby boomer's numbers might
look something like this:
- At age 62, your payment would be $780 a month.
- If you work until age 66, your payment would be
$1,080 a month.
- If you work to age 70, your payment would
be $1,464 a month.
These estimates aren't fixed in stone; they're based
on elaborate actuarial calculations that include assumptions that
you will continue to earn about the same annual income you made
during the last couple of years, and that your life expectancy will
be somewhere around what they expect it to be (the current national
average is about 77 years).
If we do the math based on living to 77, we get the
following total payout over the years we draw out, which does not
include any interest that could be earned with that money:
Retire at 62: $140,400 ($780/month x 180 months).
Retire at 66: $142,560 ($1,080/month x 132 months).
Retire at 70: $122,976 ($1,464/month x 84 months).
That's right, despite the rather large discrepancy
in the monthly benefit estimates, if you live the average lifespan,
you may be better off retiring earlier; especially if you think
you can invest the money at a better return than Social Security
estimates it will make, at the Treasury-bond rate.