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Why Is Everyone Filing for Social Security Early?
Townhall ^ | 07/25/2012 | Carrie Schwab Pomerantz

Posted on 07/25/2012 2:59:16 PM PDT by SeekAndFind

Dear Carrie:

I'll be 62 next month. All my friends seem to be taking Social Security on their birthday. I've heard this may not be the wisest choice. What do you think? --A Reader

Dear Reader:

Turning 62 seems to be one of those magic milestones -- and more and more people seem to be celebrating by filing for Social Security benefits the first chance they get. According to the Stanford Center on Longevity, the majority of retirees choose to begin receiving Social Security payouts within a few months after age 62 or immediately after they stop working, regardless of economic or educational status.

The reasons for taking benefits early appears to be primarily emotional -- fear that Social Security will disappear or just because it's possible to do it -- rather than considering if it makes long-term financial sense. In fact, a new study by economists John B. Shoven and Sita Nataraj Slavov indicates that rather than putting extra money in your pocket, taking Social Security benefits early may likely leave a fair amount of money on the table.

But studies aside, deciding the best time to take your benefits is a personal decision, based on your individual situation. So before you join your friends at the benefits table, I'd check your own financial reality.


The ongoing recession has made this a serious question for a lot of people. For those who have lost their jobs and are having trouble finding other employment, taking Social Security benefits early may be essential to stay afloat.

On the other hand, if you're still working and you file at 62, not only will your benefits be permanently reduced by about 25 percent, $1 will be deducted for every $2 you make above the annual limit, which is currently $14,640. While you will get the money back in the form of a recalculated benefit when you turn 66, the temporary reduction minimizes the economic value of filing early. Plus, if you make over a certain amount each year (between $25,000 and $34,000 for single filers; between $32,000 and $44,000 for married filing jointly), you will likely have to pay income taxes on a percentage of your benefits.


There's also another way to look at the numbers. The study I mentioned earlier makes a strong economic case for delaying benefits, especially in a low-interest environment like the one we're in now. First, if you delay taking your Social Security benefits from age 62 to your full retirement age (66 for those born between 1943 and 1954), you'll increase your payout by 25 percent. And if you continue to delay taking your benefits until age 70, your payout increases by 8 percent each year. That's equivalent to an 8 percent raise! The study suggests that when interest rates are 3.5 percent or below, the gains from delaying are especially significant. In a close to zero-interest world like ours, the numbers speak for themselves.


Of course numbers are only one side of the story. You also need to consider your health and your family history of longevity. The average life expectancy for American women turning 62 this year is 85 1/2, for men it is 83. If you have a serious illness or there are other factors affecting your life expectancy, you might be wise to take your benefits early. However, if you are healthy and come from a family of centenarians, you should definitely consider waiting until 70 to collect to give yourself a financial boost in your later years.


If you are married, it also makes sense to coordinate the timing of your Social Security benefits with your spouse. Even if one spouse has never worked, he or she is often still eligible to collect a benefit based on their spouse's work record. If either spouse begins to collect early, their benefit will be reduced. However, for two-earner couples, and especially if there is a large discrepancy in incomes, it may make sense for the lower earner to take a spousal benefit at age 66, while the higher earner waits until age 70. The lower earner can either continue receiving spousal benefits or switch to their own benefit when they turn 70. As you can see, this type of calculation can get extremely complex. I strongly advise couples to get some help from a qualified financial advisor or Social Security expert before filing.


While it is often wise to delay taking Social Security benefits, your decision should always be part of a larger retirement plan. I would start by estimating what your yearly expenses will be in retirement. Calculate how much you can realistically draw from your portfolio and how significant Social Security will be to your overall financial picture. And then coordinate with your spouse. Just because the government allows you to draw your benefits at 62 -- or even at 66 -- doesn't mean you should. Your retirement plan is unique. What someone else considers a wise decision may not be the best move for you.

-- Carrie Schwab-Pomerantz, CERTIFIED FINANCIAL PLANNER(tm), is president of Charles Schwab Foundation and author of "It Pays to Talk." You can e-mail Carrie at This column is no substitute for an individualized recommendation, tax, legal or personalized investment advice.

TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: socialsecurity
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1 posted on 07/25/2012 2:59:20 PM PDT by SeekAndFind
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To: SeekAndFind


2 posted on 07/25/2012 3:02:00 PM PDT by BenLurkin (This is not a statement of fact. It is either opinion or satire; or both)
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To: BenLurkin

Taking SS at 62:

1)I might die tomorrow.

2)”If you are already receiving benefits, the program will not change for you.” All others are screwed.

3 posted on 07/25/2012 3:07:49 PM PDT by super7man
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To: onedoug

Yikes 62 doesn’t sound to good if your spouse is still working.

4 posted on 07/25/2012 3:08:16 PM PDT by windcliff
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To: SeekAndFind

I retired at age 63 and it was one of the best decisions that I have ever made. I ran the numbers and with SS, pensions, 401(k) and no debt it was really a no brainer. No more stress from a long commute and the nightmare of the corporate culture. I was burned out and ready for a change. Now I can live life on my terms. Go for it.

5 posted on 07/25/2012 3:08:16 PM PDT by SVTCobra03 (You can never have enough friends, horsepower or ammunition.)
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To: SeekAndFind
Why? Unemployed and benefits ran out or employed only part time and can't make ends meet otherwise, for one.

Afraid the program won't last and so they're going for it as soon as possible, for another. It's not as if the government hasn't taken hundreds of thousands of dollars from the average wage earner over their lifetimes under the false pretense that this is some sort of pension in a “lockbox.”. It's been handed out like candy. Noncitizens are drawing SS under someone else’s number, you can't do anything about it and the government certainly won't.

The more rational question would be, why wait?

6 posted on 07/25/2012 3:08:26 PM PDT by RegulatorCountry
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To: BenLurkin
Take a look at how much you won't get if you wait for your 65th birthday.

That will be three years of a monthly nothing check from Social Security.

Good luck in your retirement.

7 posted on 07/25/2012 3:08:40 PM PDT by OldNavyVet
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To: super7man

Started receiving benefits at 62 in May.

8 posted on 07/25/2012 3:13:14 PM PDT by abb ("What ISN'T in the news is often more important than what IS." Ed Biersmith, 1942 -)
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To: SeekAndFind
I retired at 60 with 25 year service in my plan. I started SS at 62. I had no idea that someone like Obama would be elected and increase the chance of total world destruction. I had no idea that the money in government could disappear so quick. I did not know that the government had been spending the Social Security Trust fund since JFK. I did not know that I would have prostate cancer either. I didn't know! Glad I went as soon as I could.
9 posted on 07/25/2012 3:17:35 PM PDT by mountainlion (I am voting for Sarah after getting screwed again by the DC Thugs.)
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To: SeekAndFind

the reason is not “emotional.” the reason is because these people have been laid off and can’t find a job and have been hanging on by their toenails until the day they can file for social security. I am sure most of them would rather be working, but Obama saw to it that the business environment is freezing

10 posted on 07/25/2012 3:22:55 PM PDT by yldstrk ( My heroes have always been cowboys)
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To: SeekAndFind

“While you will get the money back in the form of a recalculated benefit when you turn 66...”

I don’t understand. I understood that if you retire at 62 what you are calculated to receive at 62 is the permanent amount you will recieve.

11 posted on 07/25/2012 3:24:33 PM PDT by Beowulf9
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To: abb

The choice is between normal benefits at 65, or taking an 25% reduction in benefits to get 3 more years of benefits. It will take 12 years (or 15 if you want to count from 62) before the normal benefits catches up to the extra 3 years.

Much is made of the need to have adequate income in the last years of life. But I think it’s easy to overlook the utility of having income while you are still able to enjoy it.

12 posted on 07/25/2012 3:26:40 PM PDT by TennesseeProfessor
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To: RegulatorCountry
“Noncitizens are drawing SS under someone else’s number, you can't do anything about it and the government certainly won't.”

i know for a fact this is true...i recently had my pocket picked and my wallet stolen on the subway in nyc with my medicare card and all id stolen...of course my state DL and credit card providers cared but i called both ssa and medicare and neither one gave a damn....would not post any type of alert nor would they even allow me to give them my ssn...they didn't and don't give a damn if anyone uses my “sh*t”...could it be that we have a president with a fraudulent ssn...can;t even use a birth certificate any longer to get any kind of id state or fed...could that be because the impostor in chief doesn't have one of those either?

13 posted on 07/25/2012 3:29:21 PM PDT by ldish (Give me Freedom and Liberty or let's kick some a**!)
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To: SeekAndFind

You take smaller amount at 62.5 years of age you have to live beyond age 84 before you lose out of the early option of less over a longer period of time.... Sort of a penny a day doubled everyday for thirty days or ya want 3 million dollars now thang ?.

Less is more , Lester Moore shot with a .44 is no more here lies Lester etc...

14 posted on 07/25/2012 3:30:26 PM PDT by Squantos
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To: ldish

Good news is the thief will have to file yer tax returns now.... :o)

Sorry for yer troubles. Hope it all gets fixed.

Stay safe !

15 posted on 07/25/2012 3:34:18 PM PDT by Squantos
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To: SeekAndFind

A bird in the hand is worth 2 in the bush. What one receives at 62 is probably worth more than what one would receive at 65, with the (unreported) inflation eating away at it. $1 at 62 will buy you a small bottle of soda; at 65 it will buy you a styrofoam cup of warm tap water. Naturally, the Dem media organs will be sure to point out how healthy tap water is, and how fortunate we are to have it while so much of the world goes without.

16 posted on 07/25/2012 3:39:25 PM PDT by kearnyirish2
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To: SeekAndFind
"Get it while you can..."

Janis Joplin

The Kenyan must go.

17 posted on 07/25/2012 3:42:38 PM PDT by ex91B10 (We've tried the Soap Box,the Ballot Box and the Jury Box; ONE BOX LEFT!)
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To: SeekAndFind

Widows can file for SS at age 60. It’s somewhat reduced, but maybe if you wait, you won’t live that long; or the govt may not live that long; or the horse may talk.

18 posted on 07/25/2012 3:50:19 PM PDT by Lady Lucky (If you believe what you're saying, quit making taxable income.)
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To: SeekAndFind


“If you live to the average life expectancy for someone your age, you will receive about the same amount in lifetime benefits no matter whether you choose to start receiving benefits at age 62, full retirement age, age 70 or any age in between. However, monthly benefit amounts can differ substantially based on your retirement age. Basically, you can get lower monthly payments for a longer period of time or higher monthly payments over a shorter period of time. The amount you receive when you first get benefits sets the base for the amount you will receive for the rest of your life, though you do receive annual cost-of-living adjustments and, depending on your work history, may receive higher benefits if you continue to work.”

19 posted on 07/25/2012 3:50:43 PM PDT by DugwayDuke
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To: ex91B10
The great unknown is means testing. Will it come? Probably. Will it impact those already receiving SS? Probably not. Will it impact those about to qualify? Unknown. Will the means test be based on income, net worth, or net worth exclusive of home? Probably income. So . . . if you have provided for your future in retirement through a pension or an IRA and you are not yet receiving benefits, I have the following advice:

1. Work as long as you can at least until age 66.

2. If you do retire before age 66 delay claiming your benefits as long as possible.

3. However, be prepared to begin taking your benefits if it appears that means testing is about to be implemented.

20 posted on 07/25/2012 3:54:18 PM PDT by p. henry
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