I am frequently asked on my syndicated radio show, and from readers of my weekly internet newsletter Financial Savvy Report about the new rules for taking Social Security benefits. The question most often asked is "Do I take Social Security at age 62 or wait to age 66?"Â
The new benefit law has changed the picture. If you turn age 62 this year your benefits will be 75% of those at age 65 [Old law 80%], and if you have earned income on the job of more than $12,960 in 2007 [not income from investments, IRAs, dividends, interest, rental property, etc] every $2 in earnings over this amount will reduce your benefits by $1. Also, taking benefits early you will miss the cost of living adjustments each year until your take the benefits. But remember, if you have a surviving spouse your benefits cease at your death. She will then typically receive 100% of your previous benefit.
Here's the two choices:
If you don't expect to have earned income on the job, take the reduced benefits at age 62. Or if you are in poor health, or have a family history of health problems, take the benefits at age 62 because Social Security payments stop at your death. If the surviving spouse, or in some cases dependent children file a claim within six months of death, the death benefit from the original law passed in 1935 will pay $255 as life insurance.
If you wait to age 65 and 10 months [normal retirement age under the new law for 2007] to begin collecting benefits your monthly benefit will be higher and you'll have no earnings test, but experts say you'll have to live to age 82 to break even on Social Security income you receive.
However, remember, Social Security has no reverse gear. Once you've made a decision, you are typically stuck with it for the rest of your life. So get all the help you need before you decide when to take the benefits. By James Jorgensen www.financialsavvy.com
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