As a seasoned Fool writer, I like to think I know what to expect. If I write an article critical of Wal-Mart (NYSE:WMT), perhaps examining how it treats its workers, I'm going to hear from readers who like the company. If I offer any complimentary words to Wal-Mart, perhaps noting its recent pro-environment initiatives, I'm going to hear from readers.
I was a little surprised, though, after writing about when to take Social Security, to get a lot more mail than usual. Fortunately, instead of berating me for my views, most of the missives simply offered some additional, and instructive, perspectives. Permit me to share some with you.
Fools on timing
One reader pointed out, correctly, that with couples, it's important to take into consideration joint life expectancy. A surviving spouse, for example, may end up depending on part of the deceased spouse's Social Security income for many years.
Another reader pointed out that while it might be academically interesting to see how the value of payments over different periods would grow at different rates of return, he and many others wouldn't be investing their benefits but would instead be living off them. That's very true indeed.
Other readers pointed out that if you choose to take your benefits early, but you keep working part time or full time until your normal retirement age, you may see your benefits reduced significantly. If you earn more than about $13,000, you'll lose $1 of your Social Security for every $2 you earn over the limit. That means if you have a job making a modest $23,000 salary, you'll forfeit $5,000 of your Social Security benefits.
Some advisors therefore suggest delaying your benefits or looking for jobs that provide tax-free benefits such as health insurance. Depending on your health, a better health insurance program may be worth far more than what you see in your paycheck every two weeks -- and it might keep you under the income limit, allowing you to keep all of your Social Security benefits.
Control your destiny
Of course, I suspect that many retirees won't be so lucky as to find such a job with health benefits. That's one of several things out of our control, to a great degree. What we need to do to improve our future is to act on things we can control. Who knows what condition Social Security will be in when we need it. We shouldn't be counting largely on it to provide for our future needs. Instead, aim to maximize retirement planning vehicles available to you, such as IRAs and 401(k) plans.
You might also want to look into target-date mutual funds. As we've explained in our Rule Your Retirement newsletter, these funds are designed around specific retirement dates, with their asset allocations chosen accordingly to give you broad diversification appropriate to your age. For instance, Vanguard's 2025 target fund owns shares of domestic companies like Cisco Systems (NASDAQ:CSCO) as well as foreign companies like GlaxoSmithKline (NYSE:GSK). As you grow older, the fund will take care of shifting its assets into investments more suitable for those who are closer to retirement.
Meanwhile, in regard to Social Security, many experts seem to lean toward recommending early withdrawals, as long as you're not earning enough to reduce those withdrawals. In many ways, this makes sense. But each of us is in a different situation. If, for example, you're 62 and you can work for another few years, it can be well worth it to keep punching that clock if you aren't satisfied with the size of your retirement nest egg. You'll earn more money, maintain your health insurance, and then later end up with higher Social Security benefits. But if at 62 you're secure that you've saved plenty to live on comfortably, it can make sense to just start taking Social Security, while you ease into an early retirement.
We want to help
Let Rule Your Retirement help you with your retirement planning -- it's prepared by Robert Brokamp, a smart and witty guy who distills what you really need to know into a manageable volume each month. A free trial will give you full access to all past issues, allowing you to gather valuable tips and even read how some folks have retired early and well. It regularly offers recommendations of promising stocks and mutual funds, too.
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Longtime Fool contributor Selena Maranjian owns shares of Wal-Mart. For more about Selena, view her bio and her profile. Wal-Mart is a Motley Fool Inside Value recommendation. GlaxoSmithKline is a Motley Fool Income Investor recommendation. The Motley Fool is Fools writing for Fools.
