Dear Dr. Don,
I have about $100,000 in my retirement fund (not much, I realize). I owe $70,000 on my home, which is worth about $300,000. I will be 62 in 2009. I want to begin receiving my Social Security at age 62, work part time and start taking a small amount of my annuity monthly. Does this sound feasible?

I presently live in Massachusetts, but will be moving back to California at age 62. Most likely, I will share or build a small home with a family member. Because my daughter and grandchild are in Massachusetts, I want to be able to come back and stay for visits a few times a year — or, one time a year for several months. What advice can you give me?

Lanie Leisure

Dear Lanie,
You’ve got it all mapped out, but there’s some bumps in the road to smooth out before you start on this journey.

First, if you take Social Security benefits at 62 and continue to work, your income could reduce your benefits. Here’s what the Social Security Administration says about this on its Web site.

From the SSA Web site:
While you are working, your earnings will reduce your benefit amount only until you reach your full retirement age.

We use a formula to determine how much your benefit must be reduced:

  • If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit.

    For 2007 that limit is $12,960. In 2008 that limit will be $13,560.

These reduced benefits will be returned to you after retirement. The Social Security electronic leaflet, “How Work Affects Your Benefits” has more details about this topic.

Also, don’t forget that by taking early Social Security, you will lose another portion of your benefit permanently. So, while you are working, you will lose a portion of your benefit temporarily and another portion permanently.

Combining these two factors will result in a significantly reduced Social Security benefit, especially during the years you continue to work.

With these drawbacks in mind, I’d like you to consider financing your lifestyle from ages 62 to 66 with something other than Social Security. I’m also worried about how you’ll finance health care costs from the age of 62 until you reach age 65, when you qualify for Medicare.

Selling the house in Massachusetts to share ownership of a small place in California may work, but run all this by your California attorney before closing on the property.

My best advice is to work with a fee-based financial planner to sort through these issues. I’d recommend visiting the National Association of Personal Financial Advisors Web site to find a planner.

Get a second opinion if you’re not comfortable with the first. My sense is that you can make this work, but it needs to be a little more structured than your current plan.

To ask a question of Dr. Don, go to the ” Ask the Experts” page, and select one of these topics: “financing a home,” “saving & investing” or “money.”