The case against Social Security at 62

Don TaylorDear Dr. Don,
What's the best time to file for Social Security retirement benefits? I'm 62, single and currently working as an insurance broker. I'm thinking of collecting Social Security now, so I can slow down and enter retirement gradually. I earn about $40,000, and I also have rental income and two small mortgage payments to make for the next 30 years. I don't need my Social Security income now, but I can't see why I should wait.

-- Joanna Juncture

Dear Joanna,
If you don't need the money now, then my recommendation is for you to wait until at least your full retirement age, 66, to file for benefits. It may be good to wait even longer, perhaps to age 70, since you'll receive a higher payment in the form of delayed retirement credits.

Too many people have the mindset that they want to maximize the amount of money they get from Social Security. And since life is uncertain, they file as soon as they're eligible. That's a misplaced concern. Government studies show that retirees, on average, receive the same amount of money in Social Security benefits no matter when they file for benefits.

So, if you're in good health and you don't need the money, you should wait.

By waiting, you earn a higher monthly benefit. And that higher benefit, like all Social Security retirement benefits, is indexed for inflation. So waiting helps ensure you have more money in your later years.

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You worked hard for your Social Security benefits. Now comes the tough question, when is the best time for you to begin receiving the benefits?

Sure, it's great to have the cash, but pulling the trigger too quickly on taking Social Security benefits could reduce your payout. For some recipients, waiting until so-called full retirement age is a good goal to consider. But if you can wait even longer, say until age 70, then you will get a higher payment in the form of delayed retirement credits.

If your full retirement age is 67 and you start receiving benefits when you're 62, you'll cut your monthly payout by about 30 percent. When is your full retirement age? It depends on when you were born. If you file early while you're still working or earning income, you might risk further reducing your benefit. So if you can, check with an accountant if you're uncertain how your income is treated in the benefits calculation.

And remember: The option to file is always there. You don't need to file now as a precautionary measure.

Also, please note that if you file early while you're still earning income, you may further reduce your benefit. You should check with your accountant if you're uncertain how your residual income is treated in the benefits calculation. You'll also owe income taxes on your Social Security benefits along with your other income.

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