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Think twice before taking Social Security at 62

Many financial planners advise that you wait as long as possible before taking Social Security benefits. Despite this, a sizable number of Americans who have reached 62 — 41 percent of men and 46 percent of women — apply for benefits at 62, the earliest age at which you can take payments. The way Social Security works, this will lock in the lowest possible payment for life.

The "early" approach works if you need the money immediately. But the decision would penalize you over time. You would be passing up a progressively higher benefit available in each of the next eight years. This period includes when you reach what Social Security calls your "full retirement age" — 66 for those born between 1943 and 1954, as old as 67 for later arrivals — and what might be called a bonus period after that, ending at age 70.

Individual dollar totals over the course of a retirement are never easy to predict, but unless your current health prognosis is gloomy, the longer you expect to live, the more sense it makes to delay benefits.

By receiving Social Security at 62, you take a haircut on potential future payments of 30 percent compared with a 6.7 percent reduction at 67. For those waiting until age 70, Social Security offers an 8 percent yearly rate of increase in payments (not including cost-of-living adjustments) over taking benefits at 62.

For couples

• The Social Security Administration provides simple tools to help you calculate retirement age, longevity estimates and benefits. tinyurl.com/p6evjq9

• T. Rowe Price has a free tool that can work with Social Security's numbers. tinyurl.com/dyrj9vr

• For a more sophisticated analysis, consider the Maximize My Social Security software. It costs $40 a year. tinyurl.com/l387teg

Think twice before taking Social Security at 62 05/23/14 [Last modified: Sunday, May 25, 2014 9:53pm]
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