hgazette.com, Haverhill, MA

January 11, 2012

When should you start taking Social Security?

Financial Focus
Michael Quinn

If you're of a certain age, the new year means you're that much closer to a day you may have anticipated with a combination of humor and resignation — specifically, the day you're eligible for Social Security. But just because you can take Social Security, it doesn't mean you must take it. So, should you?

Before we get to that question, let's review the basic rules governing Social Security payments. You can typically start collecting benefits at age 62, but you'll get only about 75 percent of what you'd receive if you waited until your "full" retirement age, which varies according to your birth year but is most likely 66. You'll get even bigger monthly checks if you delay collecting them until you're past 66, and you'll "max out" on your payments once you reach 70.

So, the question boils down to this: Should you start collecting Social Security early — thereby receiving smaller, but more numerous, checks — or later, when your checks will be bigger but fewer?

If you really need the money once you reach 62, you've already got your answer. But if you could potentially afford to wait, we recommend you view your decision through a LENS:

L: Your projected lifespan. You can't see into the future, but given your family history and general health, you can make an educated guess about your projected longevity. If you're fairly confident that, once you reach 66, you've still got another two or more decades in front of you, you may want to consider delaying taking Social Security past age 62.

E: Your employment status. If you're under full retirement age — between 62 and 66 — then for every two dollars you earn over $14,640 (in 2012), you'll lose one dollar in Social Security benefits. In the months before you reach your full retirement age, for every three dollars you earn over $38,880 (again, for 2012), you'll lose one dollar in benefits. But starting in the month you reach your full retirement age, you can earn as much as you want without losing any benefits.

N: Your need, including your other sources of retirement income. If you have a pension, or you've built substantial resources in your IRA, your 401(k) or other employer-sponsored retirement plan, and you can support your income needs with modest withdrawals from these accounts, you might decide it's worthwhile to delay taking Social Security to maximize your benefits. Remember that regardless of your Social Security decision, you typically would have to pay a 10 percent early withdrawal penalty if you started taking withdrawals from these accounts before you reach age 59¬.

S: Your spouse/marital status. If you're single, you basically just need to think of yourself when making this decision. But it's a different story if you're married. If you die first, your spouse can keep receiving his or her own Social Security benefit or receive yours — whichever is larger. Consequently, you and your spouse will want to coordinate when you take Social Security benefits so that you can maximize the benefit for the spouse likeliest to live longer.

The choice of when to start taking Social Security can affect your lifestyle throughout your retirement years, so weigh all the factors and make the choice that's right for you.

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Edward Jones Financial Adviser Michael Quinn submitted this column. Quinn's Edward Jones office is at 25 Railroad Square, Suite 201, in Haverhill. He can be reached at 978-372-8453. Join the discussion. To comment on stories and see what others are saying, log on to hgazette.com.