3 Reasons to Take Your Social Security Early


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You've earned your Social Security benefits after a long career. If you're considering taking those benefits early, here are three good reasons why that may be a reasonable option.

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  • Chart from the Social Security Administration: http://www.ssa.gov/pubs/EN-05-10147.pdf
    http://www.ssa.gov/pubs/EN-05-10035.pdf “If you are younger than full retirement age, $1 in benefits will be deducted for each $2 in earnings you have above the annual limit.
    In the year you reach your full retirement age, your benefits will be reduced $1 for every $3 you earn over an annual limit until the month you reach full retirement age. Once you reach full retirement age, you can keep working, and your Social Security benefit will not be reduced no matter how much you earn.”
  • http://www.forbes.com/sites/janetnovack/2011/02/15/the-big-decision-when-to-take-social-security/ “While those benefit amounts sound dramatically different, in theory the system is neutral—meaning if you live to an average age, you’ll end up with roughly the same total benefit no matter when you claim.”
  • http://www.ssa.gov/pubs/EN-05-10035.pdf “NOTE: Sometimes health problems force people to retire early. If you cannot work because of health problems, you should consider applying for Social Security disability benefits. The amount of the disability benefit is the same as a full, unreduced retirement benefit. If you are receiving Social Security disability benefits when you reach full retirement age, those benefits will be converted to retirement benefits.”
  • Image from clip art search in Power Point
  • Image from clip art search in Power Point
  • http://www.huffingtonpost.com/bob-rosenblatt/social-security-doover-an_b_5296254.html “Now she needs the money, and needs it quickly. She files for Social Security and begins collecting the $750 a month. She does this for 10 months, and then gets a job.
    Mary can repay the $7,500 she collected from Social Security, and there is no penalty. And no interest charges for the benefits she received. Now she has used the do-over provision, and she can wait till age 66 according to her original plan to delay benefits so she would get a bigger check.”
  • 3 Reasons to Take Your Social Security Early

    1. 1. 3 Reasons to Take Your Social Security Early
    2. 2. You have a choice on when to take Social SecurityYou can start any time between age 62 and 70. Chart from the Social Security Administration There are trade-offs: • The younger you start, the lower your monthly benefit amount, but you’ll receive benefits for a longer period of time. • If you start Social Security before your Full Retirement Age but are still working, your benefit is reduced by as much as $1 for every $2 in income you earn above an annual cap.
    3. 3. Your life, your benefits, your choice • In theory and on average, recipients’ payments are expected to more or less be about neutral based on the age they start receiving them. • That doesn’t mean your choice is completely neutral based on the age you start receiving benefits. • In the next few slides, you’ll see three good reasons to consider taking your Social Security benefits before your full retirement age.
    4. 4. No. 1: You really need the money Image from Microsoft’s Clip Art collection If your early benefits would make the difference between starving and surviving, take the money. If you find yourself unexpectedly retired early without job prospects or enough savings to last until your full retirement age, take the money. Note that if you’re disabled and under your full retirement age, you can take Social Security disability instead of retirement benefits, and those disability benefits are not reduced based on your age.
    5. 5. No. 2: You don’t anticipate a long life If you have a good reason to believe you will not survive to reach the “average” life expectancy, taking benefits early could provide you more over your lifetime than waiting. Of course, none of us really knows when our time is up. If you defy the odds and your expectations, your lifetime benefits could be lower by starting early. Image from Microsoft’s Clip Art collection
    6. 6. No. 3: You’re a decent investor Image from Microsoft’s Clip Art collection If you’re retired, your key sources of income are your pension (if you get one), your Social Security, and the money you earn from your investments. Money you receive from Social Security is money you don’t have to take out of your investments to cover your costs of living. That money you’re not taking out of your investments can compound longer on your behalf, potentially remaining tax deferred. Additionally, if you invest well and get a decent rate of return, you may end up with higher lifetime retirement income than had you spent down your investments earlier to cover what Social Security could have been paying you in early benefits.
    7. 7. Still – there are some watchouts Taking Social Security early may seem like a good idea, but remember… • If you start early, your benefits are likely permanently reduced. • The only “do over” option requires you to pay back all the benefits you’ve received since starting and only lets you take that “do over” in the first year you’re receiving benefits. • As you age, your costs may rise faster than the inflation rate used to adjust Social Security benefit checks. • Health care costs have been rising faster than inflation and generally increase as people age, even without considering health care cost inflation. • You may start needing to hire people to help you with tasks you used to be able to handle on your own, adding to your costs. • Even if you are a decent investor, the market may not cooperate. • Once you start relying on your portfolio for income, a market downturn has a bigger impact because you can’t “wait it out” as easily. • While benefit cuts are expected when its Trust Funds empty, Social Security’s payments until then have no direct contact with how the market performs.
    8. 8. How to Get Even More Income During Retirement