The other great Social Security debate
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Conversely, once you reach your normal retirement age, you can continue working all you want and begin collecting Social Security benefits with no penalty. Be careful here though, because if your normal retirement age is 66 and 6 months, and you begin collecting benefits on Jan. 1 of the year you turn 66, you'll have to forfeit $1 for every $3 you earn above a different limit ($33,240 in 2006) until you've reached 66.5 years.

Collect early -- or wait?
Experts disagree on whether it makes more sense to begin collecting the money early or wait until normal retirement age or later. In last month's issue of CPA Journal, Thomas Dalton, a professor of accounting and taxation at the school of business administration at the University of San Diego, makes a case for collecting benefits early, at least for retirees who have substantial tax-deferred retirement savings. While life expectancy is an important consideration, it isn't the only one, Dalton says.

In his analysis, Social Security benefits are used for the majority of a retiree's needs, along with small distributions from a retirement fund. If someone begins collecting Social Security early, he reasons, the need to draw on tax-deferred retirement savings is greatly reduced, which would allow the retirement funds to continue growing. But this works best if a retiree expects to earn 5 percent or better in these savings. "The higher the expected rate of return, the more advantageous it is to leave retirement savings alone by drawing a reduced Social Security benefit at age 62," he writes. Those who expect a 2 percent return on their retirement funds should opt for getting benefits at the normal retirement age or later, according to Dalton.

Others disagree with his analysis. Henry Hebeler, a former Boeing executive who runs a retirement Web site called www.analyzenow.com, arrives at the opposite conclusion: that it's almost always better to begin drawing Social Security funds later, if possible. His site offers a spreadsheet that shows his analysis.

The bottom line: There's no pat answer about the best time to begin drawing Social Security benefits. The answer largely depends on individual needs and resources. Just don't enter into the decision lightly. If you plan to continue working, then it makes no sense to start collecting early. If you plan to retire soon, take stock of your situation, review the Social Security Web site for all the arcane rules that may apply to your situation and pick the brains of a financial planner before you apply for benefits. If you do your homework, that would at least remove some of the uncertainties in your future.

Longtime financial journalist Barbara Mlotek Whelehan earned a certificate of specialization in financial planning. If you have a comment or suggestion about this column, write to Boomer Bucks.