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The case for staying on the job

By Jennie L. Phipps · Bankrate.com
Tuesday, August 10, 2010
Posted: 5 pm ET

A record number of Americans signed up to take Social Security benefits last year -- 75 percent of them are younger than full retirement age, which is 66.

The huge number of first-time filers combined with the reduction in contributions because of high unemployment has resulted in Social Security taking in less than it paid out for the first time ever.

Democratic Sen. Dennis Kucinich of Ohio, told the Associated Press that it's easy to understand why so many people are tapping Social Security early. "They're not working. They've been laid off. Their plant closed."

But who can live on reduced Social Security? It's lousy retirement planning.

You lose one-half of 1 percent for each month you start your Social Security before your full retirement age. For example, if your full retirement age is 66 and you sign up for Social Security when you are 62, you would only get 75 percent of your full benefit.

Social Security offers this illustration: A $1,000 benefit payable at 66 would be reduced to $750 if the recipient opted to take it at 62, and the spousal benefit, which would be $500 at 66, is reduced to $350 at 62.

Not only do people who file early take a permanent haircut on their benefits, but also if they work plus collect Social Security and earn more than $14,160, they lose $1 in benefits for every $2 they make.

Once they reach full retirement age, they can earn whatever they want, and their Social Security benefit will not be reduced.

Unemployment is tough. I see a lot of it here in the Detroit area where I live. But I also see an increasing number of opportunities for people who are capable to get training for new kinds of employment. And I see plenty of available service jobs that aren't high skill. The work is clearly not a thrill a minute, but the financial reward seems worth it.

It's simple math: The longer you work, the more likely it is that you won't live in poverty in retirement. Why people who aren't wealthy or sick quit early baffles me.

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