By DANIEL O. TULLY
As someone approaches retirement, he or she must decide when to take Social Security benefits. There are two options: Begin taking benefits between age 62 and full retirement age, or delay benefits and take them anytime up to age 70. More than two-thirds of people of retirement age take their benefits early.
Some people don’t have a choice - they need the money right away. But for others, it might make more sense to delay benefits, even past their full retirement age. Ultimately, it is a personal decision that depends on whether one plans to keep working, one’s health and life expectancy, spousal needs and the availability of other retirement plans.
For anyone born before 1937, full retirement age is 65. For those born after 1937, the retirement age gradually increases until it reaches age 67 for people born in 1960 or later. If you take Social Security benefits between age 62 and your full retirement age, your benefits will be reduced to account for the longer period you will be paid. If you delay taking retirement, depending on when you were born, your benefit will increase by six to eight percent for every year that you delay, in addition to any cost of living increases.
If you are lucky enough to have the choice of when to take benefits, consider the following factors:
Whether you plan to keep working
If you plan to work until your full retirement age or beyond, it probably won’t make sense to take benefits early, especially if you earn considerable income. Any income you earn above Social Security’s income threshold will be taxed. So, not only will you be receiving reduced Social Security benefits, but you will pay tax on the income as well and the extra income may mean that more of your Social Security will be taxed.
Health and life expectancy
To get the full advantage of delaying benefits until age 70, you will need to live past age 80, not taking into account cost of living increases. The average life expectancy for men who reach age 62 years of age is round 80. For women, it is around 83. You can’t predict exactly how long you will live, but if you are healthy and have a long, life expectancy, you may receive more benefits if you delay.
Another important consideration is your spouse’s needs. An older spouse (and especially if he is the breadwinner), might want to delay benefits as long as possible so as to increase the surviving spouse’s survivor benefits and provide additional protection to the surviving spouse.
Other retirement plans
Experts disagree whether it makes sense to take benefits early and defer using other retirement plans. Some claim if you are going to get a higher rate of return on tax-deferred retirement plan than you would by waiting to take Social Security, you should take Social Security early.
Attorney Daniel O. Tully is a partner in the law firm of Kilbourne & Tully, P.C., members of the National Academy of Elder Law Attorneys Inc., with offices at 120 Laurel St., Bristol. (860) 583-1341 or ktelderlaw.com