The ideal age to start So­cial Se­cu­rity? Truth is, it de­pends.

The Washington Post Sunday - - BUSINESS - Rod­ney Brooks

If there is one piece of ad­vice that fi­nan­cial ad­vis­ers seem nearly unan­i­mous on, it’s So­cial Se­cu­rity and when you should take it. If you can, wait till you’re 70. You could dou­ble your monthly check. Granted, it may be good ad­vice, but few peo­ple take it. It makes you won­der: Is there a dis­con­nect be­tween fi­nan­cial plan­ners and “real peo­ple”?

In fact, most Amer­i­cans don’t wait that long. Ac­cord­ing to the So­cial Se­cu­rity Ad­min­is­tra­tion, 37 per­cent of peo­ple take re­duced ben­e­fits at 62, as soon as they are el­i­gi­ble. Another 18 per­cent take stan­dard ben­e­fits at full re­tire­ment age (66 for most baby boomers), and only 3 per­cent waited un­til 70 for the max­i­mum monthly bonus.

But the prob­lem is that life ex­pectan­cies are ever in­creas­ing — to nearly 80, ac­cord­ing to the Cen­ters for Dis­ease Con­trol and Preven­tion. If you live till 65, you are likely to live another 18 to 20 years, depend­ing on your sex.

If you take So­cial Se­cu­rity be­fore full re­tire­ment age, you lock in a 25 per­cent re­duc­tion for the rest of your life. If you wait till you are 70, you can get an ad­di­tional 32 per­cent boost in

monthly ben­e­fits (or roughly 8 per­cent for each year you wait).

So should you take it at 62, 66 or 67? Or wait till 70? Truth is, it de­pends.

“Gen­er­ally speak­ing, if it’s at all pos­si­ble, it’s best to de­lay tak­ing So­cial Se­cu­rity at least un­til you reach full re­tire­ment age,” says au­thor Lyn­nette Khal­fani-Cox, chief ex­ec­u­tive of TheMoneyCoach.net. “Of course, that’s eas­ier said than done be­cause most Amer­i­cans who haven’t saved enough for re­tire­ment prob­a­bly feel like they don’t have any other good op­tion.”

“So­cial Se­cu­rity is not al­ways a black-and-white an­swer,” says Jen­nifer Lan­don, founder and pres­i­dent of Jour­ney Fi­nan­cial Ser­vices in Idaho Falls, Idaho. “We have soft­ware that helps us com­pare dif­fer­ent strate­gies.”

Of­ten, based on life ex­pectancy, the soft­ware says wait till 70, she says.

“I al­ways say it de­pends on cir­cum­stances,” Lan­don says. “It de­pends on how much they have saved up.” For in­stance, if it looks like the client will be forced to with­draw too much from their sav­ings early in re­tire­ment, she will rec­om­mend that they take So­cial Se­cu­rity early.

Mary Beth Franklin, a con­tribut­ing editor at In­vest­ment News, says the key is to make an ed­u­cated de­ci­sion. She rec­om­mends peo­ple wait un­til 70 if they are healthy, have other in­come or as­sets they can tap, or can keep work­ing.

“If you have two work­ing spouses, if at least one of them can wait it is a great way to hedge your bets,” she says. “You are as­sured that one spouse will get a big­ger ben­e­fit and lock in a big­ger sur­vivor ben­e­fit.”

The de­tails of So­cial Se­cu­rity plan­ning can be daunt­ing, says Ron Gren­steiner, pres­i­dent of Amer­i­can Eq­uity in Des Moines. “That would lend it­self to some­one mak­ing the eas­i­est de­ci­sion . . . get it when you can . . . at age 62.”

“Very few peo­ple are wait­ing un­til age 70 to claim,” he says. “And re­ally, there isn’t an op­ti­mal guide­line for when to claim. It de­pends on each per­son’s sit­u­a­tion re­gard­ing health, fi­nances, fam­ily sit­u­a­tion, job sta­tus, etc.”

Maya Rock­y­moore, chief ex­ec­u­tive of Global Pol­icy So­lu­tions, a so­cial change strat­egy firm, says tak­ing So­cial Se­cu­rity early for some is a “ra­tio­nal” de­ci­sion.

“Peo­ple re­tire for dif­fer­ent kinds of rea­sons,” Rock­y­moore says. “When peo­ple say wait for nor­mal re­tire­ment age or 70 so you can get most out of it, they mean max­i­miz­ing the fi­nan­cial ben­e­fit. African Amer­i­cans take early re­tire­ment dis­pro­por­tion­ately, and many times it’s be­cause of health. African Amer­i­can men are hedg­ing their bets. They paid in for all their lives— they know fathers and broth­ers had short lives— and they are look­ing to get some­thing out. It is a log­i­cal and ra­tio­nal de­ci­sion.”

Khal­fani-Cox says the chal­lenge for African Amer­i­cans of when to take So­cial Se­cu­rity is tricky, since life ex­pectancy is shorter for blacks, par­tic­u­larly black men, and wages for African Amer­i­cans tend to be lower than their white coun­ter­parts. “Ad­di­tion­ally, blacks more heav­ily rely on So­cial Se­cu­rity, with about one-third of African Amer­i­can cou­ples and more than half of older, un­mar­ried blacks count­ing on So­cial Se­cu­rity for nearly all of their re­tire­ment in­come.

“De­spite these re­al­i­ties, most folks— in­clud­ing many African Amer­i­cans— take So­cial Se­cu­rity as soon as they can, at age 62,” she says. “That’s a mis­take since you could wind up liv­ing for two or three decades more and, if so, you want your So­cial Se­cu­rity ben­e­fits to be as large as pos­si­ble.”

Khal­fani-Cox cites some al­ter­na­tives to help peo­ple hold off tak­ing early So­cial Se­cu­rity ben­e­fits: Save more dur­ing work­ing years, stay in their jobs longer, or work part time in re­tire­ment.

Wil­lie Schuette, a fi­nan­cial plan­ner for the JL Smith Group in Cleve­land, says the pri­mary rea­son peo­ple take ben­e­fits early is be­cause they need the money. “Peo­ple need that in­come the day they re­tire from their cur­rent job,” he says.

Schuette says he some­times rec­om­mends that his “mid­dle­class mil­lion­aire” clients take it early even if they can af­ford to wait.

“They are in the best shape of their lives,” he says. “There are so many things they can do in their 60s and en­joy that money. The might up­grade a trip, might go first class. They might go to Europe. What­ever lifestyle goals may be. It could be a recre­ation ve­hi­cle.” Some clients just give the money to their grand­chil­dren, he says.

Most times, the rec­om­men­da­tion to wait till 70 is made be­cause the fi­nan­cial plan­ner in­dus­try is try­ing to max­i­mize client dol­lars in re­tire­ment, he says, but that may not nec­es­sar­ily be the client’s goal.

Franklin says she has a fam­ily mem­ber who works in a nurs­ing home who be­lieves peo­ple would be amazed at the res­i­dents there who are 90 and older.

“Peo­ple al­ways un­der­es­ti­mate how long they will live,” she says. “How long did my par­ents live? That’s history,” she says. “When we look at longevity of course, we just have no idea. Kids to­day may live to 110 or 120. We’re not sure. Longevity is a real is­sue in re­tire­ment plan­ning, and prob­lem is no­body knows the right an­swer un­til you’re dead.”

IS­TOCK­PHOTO

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