March 8th, 2012|
Because they start taking Social Security before their full retirement age, 72 percent of retirees lock in a lifetime of smaller benefits, according to Reuters.
They may be afraid that Congress will cut benefits that have not been claimed yet or that it will run out of money entirely, but that is unrealistic, says Michael Kitces, director of research at Pinnacle Advisory Group, a wealth management firm.
According to this article, the smarter thing to do is to wait and collect Social Security benefits as late as you possibly can.
To get your full benefit, you must delay application until your full retirement age. If you apply earlier, you get less.
Postponing your application not only boosts your initial benefit, but it also dramatically increases your income in old age, because your annual cost-of-living increases are on a bigger amount, says Christine Fahlund, senior financial planner at T. Rowe Price.
For example: Joe Smith is 61 years old and earns $70,000. If he takes Social Security at 62, he’ll get $1,325 a month. If he applies at 66, he’ll get $2,044 a month. If he takes it at 70, he’ll get $3,192 a month.
To crunch your own numbers use the Social Security Administration’s Quick Calculator.