The Social Security Dilemma

Question: I’m 62 and still working. Is it better to take Social Security now or should I wait?

Answer: It depends on a lot of factors.

Social Security retirement benefits usually begin at full retirement age (FRA), which is currently age 65. For those born after 1937, FRA will be gradually increased until it reaches 67 for those born in 1960 or later. A worker can earn a larger benefit by continuing to work past their FRA. However, if you’re willing to accept a permanently reduced benefit, you can collect as early as age 62. If your FRA is 65, taking retirement benefits at 62 will reduce your annual benefit by approximately 30%.

Generally speaking, if you’re still working and you take Social Security, $1 of benefits is lost for every $2 or $3 you earn over an exempt amount. Since I don’t know your income, I can’t give you an accurate picture. I suggest you contact your tax adviser to see how taking Social Security at 62 while working could affect your tax bill. It may behoove you to wait a few years or until you stop working.

From my experience, people in poor health or with a short life expectancy may benefit from taking benefits at 62. Additionally, if you need the cash now, by all means take it. Conversely, if you don’t need the money now, are in good health, and have a history of longevity in your family , you should at least consider postponing benefits a year or two to have a permanently higher amount down the road.

Bill’s Bottom-line: If you think you’ll live at least 15 years, consider taking benefits after age 62. If you think you’ll live less than 15 years in retirement, consider taking benefits at age 62 or 63. More information is available by visiting the Social Security Administration website at www.ssa.gov.

© 2007 Bill Losey, CFP®, CSA