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You hear all the time that you should wait until full retirement age — or until age 70 if you can — before collecting Social Security benefits. But is that the best advice, or is it simplistic?

The February issue of Kiplinger’s Retirement Report illustrates the benefits of delaying in the article, “On the homestretch to your retirement.” It points out that if your full retirement age is 66, you could gain an 8 percent-a-year bump up in benefits if you can hold out to age 70 — “a guaranteed return that’s tough to find in any safe investment product.” But if you begin collecting at age 62 instead of waiting until 66, the benefit is permanently cut by 25 percent.

Mind-numbing analysis

The multitudinous factors to consider before drawing Social Security benefits are revealed in an article in the current issue of Journal of Financial Planning called, “When to start collecting Social Security benefits: A break-even analysis.”

“It is a complicated decision with many moving parts, including health factors, family longevity, personal financial considerations and/or occupational vicissitudes,” writes author Doug Lemons, who retired from the Social Security Administration after 36 years and is now working toward CFP certification.

Lemons says Social Security benefits are designed to be actuarially equivalent no matter when you begin drawing a check, assuming average mortality rates. Under one scenario, if “Joe” is entitled to $750 a month at age 62, but waits four years until full retirement age to begin drawing Social Security, he would get $1,000 a month from that time on, corresponding with Kiplinger’s observation. The breakeven point would occur at age 78, when the amounts doled out monthly by Social Security would amount to $144,000 regardless of when Joe began taking benefits. If he lives beyond that age, he enjoys a bigger payout.

Lemons’ analysis considers a host of variables including inflation, taxes and the time value of money, and it goes into some detail about each. It also looks at different family circumstances surrounding the decision: single person, children entitled to benefits based on a worker’s record, couples applying at various times, widow’s (or widower’s) benefits and retirement benefits that are separate from widow’s benefits. What struck me is that some outcomes can be dramatically better than others, and this is particularly true when the analysis is performed on couples under various scenarios.

Bankrate’s article, 7 little-known Social Security benefits, by Jennie Phipps, reveals there are 300 different ways a married couple can decide to take Social Security benefits. How can they figure out the best strategy? Another article by Jennie, Making the most of Social Security benefits, discusses the availability of different computer programs that can help you find the optimal strategy.

Because the potential difference in pay is significant, it’s worth taking the time to do a thorough investigation before running to the Social Security Administration office at age 62 to sign up for benefits. “Take the money and run” is my husband’s philosophy. But I’m going to do everything in my power to first determine if that’s the smartest way to go, as part of our retirement planning.

Written by
Barbara Whelehan
Contributing writer
Barbara Whelehan is a contributing writer for Bankrate. Barbara writes about a range of subjects, including homebuying, real estate, retirement, taxes and banking.