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Why Waiting Longer for Social Security Is Usually Smart

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The decision about when you should start receiving monthly payments from Social Security has huge financial implications that will last the rest of your life. As a result, you can't afford to make the wrong choice. But many Americans don't have the information to make an informed choice about whether to collect benefits now or wait until later.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, tries to close the information gap by explaining the arguments for and against waiting longer for Social Security. As Dan notes, you can receive benefits as early as age 62, but they come with reduced payments compared to waiting until the current full retirement age of 66. On the other hand, you can get extra amounts in your benefit payment if you wait beyond full retirement age, maxing out at age 70.

Dan points out that one key consideration is the breakeven date, at which bigger payments taken later catch up with smaller payments taken earlier. With life expectancies for those between the ages of 62 to 70 running at around 85 to 86 right now, most people are better served by waiting even before taking into account additional factors like survivors' benefits. In the end, you have to consider your own personal taxes, investment returns, and availability of other financial reserves in order to make the best decision.

Find out how to make a smarter Social Security choice
If you don't feel as if you know enough to make the most of Social Security, you're not alone. That's why we came out with our brand-new free report, "Make Social Security Work Harder For You." Inside, our retirement experts give their insight on making the key decisions that will help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

Read/Post Comments (4) | Recommend This Article (0)

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  • Report this Comment On October 21, 2013, at 8:51 PM, neamakri wrote:

    I will retire and collect SS next year at age 65. I will get 6.67% less per month than retiring at age 66. That means that the break-even between choices is 15 years into the future (same amount collected either way at 15 years).

    Since I have type 2 diabetes, I figure to be dead in 15 years, so my personal choice is easy.

    Fortunately the Fool has helped immensely and I have a reasonable IRA holding, so retirement will be financially okay. Thank you Fools.

  • Report this Comment On October 28, 2013, at 12:33 AM, stlredhead wrote:

    I'm 62 and would like to retire at 66. All of the retirement calculators indicate I will have sufficient funds at 66. I have been researching strategies to maximize my long term retirement income. Obviously, a drawback to maximizing retirement funds, is the RMD which begins at 70.5 years old.

    I'm considering a strategy for minimizing RMD while maximizing Social Security by delaying SS until age 70, as your article suggests, while tapping my retirement savings for all living expenses between age 66 and 70. This would reduce the amount in my IRA subject to the RMD, while increasing the amount of SS income starting at age 70 by about 32%. My hope is this increased SS income will at least offset the reduced income I can generate from my retirement assets, and I can lower my income taxes at the same time.

    Is this a reasonable strategy? What drawbacks am I missing?

  • Report this Comment On November 13, 2013, at 10:39 AM, watson14 wrote:

    @stlredhead - I liked your thoughts on using your IRA first to reduce your RMD later while increasing your monthly SS by starting later. I had thought of that several years ago and it seemed to make sense .... any more thoughts on taking that path? I'm 63 so the time is approaching ...

  • Report this Comment On November 13, 2013, at 10:58 AM, Mathman6577 wrote:

    Good article and video -- it brings out all of the relevant points when trying to decide when to take SS. Of course the big unknown is how long you have left. You might want to look at some of the actuarial tables and probabilities and factor that in to the planning. Another unknown is the "quality of life" and need to spend money even if one lives to a certain age.

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