|The right time to start drawing
Social Security benefits
You may have heard some working retirees remark that
they're "working for the government," and in a sense,
they're right. If you work and are under full
retirement age for the whole year, the government deducts $1
for every $2 you earn above the annual limit; the limit was $12,000
for 2005. In the year you reach full retirement, it deducts $1 for
every $3 you earn above a different limit: $31,800 in 2005. Once
you reach full retirement age, you may earn as much as you like
without loss of benefits.
Fortunately, if you work during the in-between years,
that income, combined with delaying your retirement, will increase
your ultimate benefit amount.
Yes, you can work after you retire. But should you?
"If you're going to work full time, the answer
is no," says Carney, "because anything you make above
the threshold of $12,000, they subtract 50 cents on every dollar.
So at some number up in the $20,000-$30,000 range, you, in essence,
lose all of your Social Security benefits."
One popular way some couples have their Social Security
cake and eat it, too, is for the lesser-earning spouse to retire
at 62, then switch to the higher spousal benefit when their spouse
retires at full retirement age. Social Security's electronic booklet,
Every Woman Should Know," explains how this works in greater
There is another compelling reason that keeps people
working between 62 and their full retirement age: health coverage.
"The primary deciding factor for people retiring,
or not retiring, is not Social Security, but health care. Basically,
the sign is, 'Will work for health insurance,'" says Carney.
"Many people who are 62 will gladly work for $10 an hour, say
$20,000 a year, and health insurance. If you're paying full-boat
health insurance for a couple 62 to 65, it's going to cost you somewhere
between $9,000 and $12,000 a year, plus the deductibles and co-pays.
If you can get $8,000 or $9,000 of that paid for by an employer,
which is paid out of pretax dollars, that can increase by 50 percent
or more what you're actually making. The impact of that, so far,
outweighs the trade-offs of taxation and compound earnings on the
Social Security that it's a no-brainer."
Carney says all the calculators on the Internet can't
help you with the two biggest X factors: how long you'll live and
how you'll fare in retirement.
"I think a lot of people make the decision based
on what is rational for them. They may think, gee, if I quit work,
I know I'm going to go downhill and I'll die in two years; that
is actually true for many people. So they keep working, and because
they keep working, they live another 10 years. But some of those
people make a decision that for them is the wrong decision if they
really knew how everything would work out. You could really want
to quit working, but you're afraid to, so you waste those three
years you could have had with family because you do have enough
Bottom line: Before retiring, take stock of your health,
your investment acumen and your assets.
If you can't think of a compelling reason to retire early, Social
Security will make it worth your while to keep working.
Jay MacDonald is a contributing
editor based in Mississippi.