The Social Security Mistake That Costs Retirees Thousands

[Common Sense Party]

Granted, you may not have a choice. You may have to retire early. But if you can avoid it, if you can wait a few years, your SS payments can be much higher than if you take early payments, say at age 62.

While you're allowed to start claiming Social Security benefits at age 62, holding off for several years can add thousands of dollars to your payments over a lifetime. That's because you don't qualify for all of your earned benefits until you reach "full retirement age," which is 66 for most Baby Boomers and 67 for those born in 1960 or later.

So checks claimed at age 62 are about 25% smaller than if you wait until your full retirement age. And if you wait even longer, your annual benefits will grow by another 8% for each year you wait up to age 70.

For example, let's say 61-year-old Mary, who currently earns $55,000, is deciding when to retire. If she were to file for Social Security benefits next year at 62, she would receive around $15,400 a year, according to T. Rowe Price's Social Security benefits evaluator. If she waits until 66, however, her annual benefits would grow to around $20,500 per year. And if she is able to hold off for several more years, until age 70, her annual benefits would climb to roughly $27,100 per year.

But it only makes sense if you think you'll live long enough to get the payments to make up for waiting.

http://finance.yahoo.com/news/social-security-mistake-costs-retirees-095700758.html

[TreasonousBastard]

1. Mistake? When I hit 62 I saw the numbers and...

I'd get another couple of hundred or so a month by waiting a few years. And I could drop dead at 64.

So I took the money I could get then-- the money at 70 looked good, but there was that dropping dead thing on the back of my mind.

BTW, SS gives you plenty of time to make up your mind and sends you a complete history of your earnings and exactly what you'll get with every choice.

[CountAllVotes]

10. Wow that is so very true!

My younger brother died when he was 44 years old. Never had a chance to "retire".

I also had a fine set of cousins, all men, and they were born one after the next 1949, 1950, 1951, 1952.

All four of my cousins are also dead. I know that three of them died of cancer (same thing which took my baby brother). As for the other two, I'm not sure why they died but none of them lived to collect a cent of the money they paid into various systems throughout their lives best I know.

If you have situations like this in your immediate family (close cousins, siblings, etc.) dying way before their time, then yes, by all means take what you can get when you can get it!

It could well be some form of genetic cancer that runs in my family, I don't know. It is very difficult to know when you have one parent with a closeted family history and another one which was adopted in 1925 (or was in really 1928?). Both of my parents have been gone for well over 10 years now. They both lived to be about 75 years of age and yes, I miss them terribly still.

[Downwinder]

2. If you are on SSI you are forced to take SS at 62.

[Downwinder]

3. OTOH taking a reduced benefit might qualify you for

additional benefits in means tested programs. i.e. Medicare Part "D"

[JimDandy]

4. Mary would have to live to age 80 1/2, though, to recoup

what she gave up in SSI income, if she waited those 8 years between ages 62 and 70:

SSI at age 62=$15,400 x 8 years = $123,200 in lost benefits.

The difference in yearly benefits between what she would draw at age 70 rather than 62 is $11,700 [$27,100 - $15,400=$11,700].

Therefore, dividing the $123,200 in lost SSI by the difference of $11,700 gives 10.5299 years she would have to live after age 70 to make back the benefits she gave up for those 8 years.

The question then really is: How confident are you that you could live to age 80 1/2 in order to break even?

[Common Sense Party]

5. You don't even have to wait until 70. Just wait until full benefit age--66 and however many months f

Age 67 for me...although I suspect that will be raised by the time I get to retirement age.

Benefits are reduced by about 8% for each year before your full retirement age that you take the money.

Most of us will live past 80. Not all, so if someone has a history of short life expectancies in the family, they'd probably want to take it early. But if you want more money later, and if you're in good health and want to keep working--thereby allowing you to wait longer before tapping into the 401(k) or other savings, then waiting until full retirement age to take SS can make sense.

[question everything]

6. And some of us are just sick and tired of our work place

Perhaps not at 62. But 66 is quite acceptable.

[Common Sense Party]

7. Absolutely. Quality of life is every bit as important as standard of living (income).

And your SS payments at 66 will be much higher than at 62.

[hollysmom]

8. I did the math and didn't want to remortgage my house, so when I was laid off before 60

I lived on savings and then took SS at 62. I did not do it lightly, I would have had to wait until age 67, not 65 to get the max and I would have had to borrow money to live on, this way, my savings give me a cushion for a good life. I did the math and took my pension at 62 as well, also a good idea. You have to not only calculate the money difference but what it would cost you in loss of interest on savings. Now I am crying as my savings is aging out of the 5+ percent I had invested them in several years ago, but eh. would happen no matter what. i did get the interest on the money all those years. it is not you would have gotten x much in so many years, but x much plus interest - so it's more like 85 is the break even year. No one in my family has lived that long.

I lost 15% on my pension, but as I said, it paid off. Now the stupid company is trying to get me to take a lump sum and I am refusing, ha ha . But they may win eventually.

ETA - I already died and was resuscitated due to error in a prescription and the instruction on taking it. Thanks Doc, , years before refused to have an anesthesiologist work on me because he looked distracted, got another one, his patient on elective surgery did not come out of the anesthesia. Not sure if she ever recovered because they threw me out of the hospital when they woke me up in the recovery room way too soon by screaming so much, guess they did not want to have a witness, they made me leave the hospital right away instead of the promised 3 hour recovery time. I am living on borrowed time.

[SheilaT]

9. Personal circumstances do matter a lot.

The other thing to be paying attention to if you continue to work but elect to take social security before your full retirement age (currently 66, will start rising in two month increments depending on your birth year) you will lose ss money after some specific amount in earnings. Okay, I just went to the ssa.gov website and found that it's currently $15,120 in gross wages or net self employment. The year you retire, you can earn up to $40,080 that year, without losing anything.

Here's a link to the page: http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/236

I plan to start collecting my social security next year, when I turn 66. I will still keep on working, and will initially throw most of my social security into savings. I expect to live well into my 80's, possibly a good decade longer. While it is sort of true that any of us could drop dead at any time, I don't worry about that happening. I am planning very carefully so that I can live a very long time and be okay financially. I am in excellent health, lucky me. I would generally advise people to think about collecting social security as soon as they hit their full retirement age and keep on working for a couple of years and save as much as possible during that time. For a reasonable number of people it's feasible. Others need to make different decisions.