Consider the Impact of Collecting Social Security Retirement Benefits Early

As many older workers find themselves out of work as a result of the lingering effects of the global financial crisis, it can be tempting to begin collecting Social Security benefits at age 62.  Policy analyst Bruce Bartlett writes for The New York Times Economix blog (2/5/13), “there is a huge financial price to be paid for drawing Social Security benefits early and an enormous payoff for delaying the decision to claim benefits. Unfortunately, I think many workers have a “use it or lose it” attitude, incorrectly thinking their benefits will be bumped up when they reach the full retirement age or ignorant that their benefits rise when receipt of them is delayed.”

Persons who collect SS benefits prior to their full retirement age “lose $1 of benefits for every $2 of earnings they receive above $15,120 – equivalent to a 50 percent marginal tax rate on an annual income barely above the minimum wage.” Because delaying collecting SS results in a higher benefit for each year one delays up to age 70, “Social Security benefits are… 57 percent higher at age 70 than at age 62.” “The delayed retirement credit is an extraordinarily good deal – where else can one get a guaranteed 8 percent annual return these days? The lower interest rates are, the better deal it is.” If you realize you made a mistake in collecting early, you are allowed one year in which to repay benefits received and “reset” the clock.  By choosing to delay benefits to your full retirement age or as late as age 70 you essentially earn an 8% guaranteed return. By ensuring a larger SS benefit, it can be easier to decide how to spend your retirement savings during the early go-go years of retirement. Read the full article with links to helpful resources at: http://economix.blogs.nytimes.com/2013/02/05/one-recession-cost-is-lower-social-security-benefits/?src=recg