retirement

The right time to draw Social Security benefits

Or, as Dirty Harry might put it, are you feeling lucky?

The wellness factor 
Seriously, how healthy do you feel? Are you physically active, in relatively good shape, no bad habits or life-threatening health problems to speak of? Did everyone in your family live into their 90s?

If so, you may want to wait for the larger payoff.

"If you live longer than they expect, you are actually better off, all other things being equal, to wait," says Boone. "The reason for this is you're getting a larger dollar amount, but you're getting it longer than they thought."

The difference could amount to a windfall over time. Say you live to 90, your 20-year monthly benefit of $1,464, retiring at 70, will reap a total payout of $351,360 versus $262,080, if you retire at 62.

But if you have health problems or other issues that may shorten your life, you might want to retire earlier.

"If you live a shorter period of time, you would be better off taking it earlier," says Boone. "That extra three, four, five years of payments is going to make a big difference for you."

Then again, if you're an active investor who routinely outperforms the stock market, having the money earlier may enable you to better the guaranteed payout from Social Security.

For instance, let's imagine that you have other financial resources, so you deposit your monthly Social Security checks in an investment account that consistently earns 10 percent, on an annualized basis (an unlikely scenario, but we're pretending). If you retire at 62 and deposit $780 per month, by age 77 you'll have amassed $323,287. But if you wait until 70 to begin drawing benefits and then start investing $1,464 per month, by age 77 your account will have grown to $177,071.

The potential for higher returns in the stock market underpins the main philosophical argument behind President Bush's push to privatize Social Security. The problem is, the stock market is risky, so the downside of privatization, of course, is: What will become of those whose investments underperform?

The working retiree 
The other part of this equation, particularly for go-go baby boomers, is the question of working after retirement.

Can you work and retire? The answer is yes, up to a point.

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 for 2007 is $12,960. In the year you reach full retirement, it deducts $1 for every $3 you earn above a different limit: $34,440 in 2007. Once you reach full retirement age, you may earn as much as you like without loss of benefits.

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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?

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