, Newburyport, MA


June 3, 2014

A look at Society Security claiming risks

Over 50 percent of those who turn age 62 this year will turn on their Social Security benefits. By doing so, more than half of those are making a decision measurably harmful to their financial well-being in retirement.

Through my practice and through my research, I learn that the single most commonly stated reason for making an early claim at age 62 is the fear that Social Security may fail. Folks like these want to be instantly gratified by this income benefit no matter the amount. Take what money is on the table today and run with it. This fear is unfounded simply viewed politically.

There are only two sound and financially prudent reasons for making an age-62 claim: seriously poor health with short life expectancy and financial desperation — no job and no assets. These circumstances do not apply to the multitude of early claimants, whose fear or ignorance will cost them and their families dearly in the long term.

If you were born in 1954 or earlier, you are entitled to your full Social Security benefit at age 66. If you were born after 1954, then your full retirement age is beyond 66 by a couple of months, but never greater than age 67. Whatever your year of birth, making a claim at 62 will reduce your monthly benefit by 25 percent to 30 percent ... for life.

The maximum you can claim is at age 70 by which time your benefit will have increased by 8 percent for every year you hold off. So, say, a person born in 1952 is entitled to $1,500 a month at age 66. That person will get 32 percent more for life starting at age 70.

Other claiming strategies apply to married couples. These strategies can be complex and are beyond the scope of this article. But a simple illustration of a couple, both born in 1952, is his age-66 benefit is $1,800 and hers is $900. She could take her full $900 at 66 and he could take the equivalent of half of hers (this is his spousal benefit) or $450 at 66. He thereby protects his own benefit until he’s 70 when it’ll be about $2,400. Also, if he dies before she does, her spousal benefit is 100 percent of his.

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