A big decision in retirement planning is when to begin receiving social security benefits. Should you begin receiving benefits as early as possible? Is it better to wait and get a bigger benefit later? What at the pros and cons?

Fortunately, there are some handy calculators on the Social Security Administration Web site to help guide you through this decision. We’re going to walk through this calculation together.

First, go to www.ssa.gov, and from the home page, click on “calculate your benefits,” under the Retirement heading.

This brings you to a page where you have to select among three different types of calculators:

Using the Quick Calculator, enter your date of birth and current year earnings. You’ll also need to choose whether to show your benefits using “today’s dollars” or “inflated future dollars.” My recommendation is to use today’s dollars since it is easier to relate to.

After clicking on “submit” you now see a screen showing your estimated benefit at early retirement (age 62); normal retirement (age 66 for many); and delayed retirement (age 70).

You receive a greater benefit by waiting – but is that a smart decision? There is a link on the output screen called “break-even age.” Choose this link and you will see how many years are required before the cumulative benefits of normal or delayed retirement outweigh the advantage of receiving a smaller, but earlier benefit.



I did this calculation for myself and found that if I compared age 62 vs. 66, I would need to live to almost age 77 before the cumulative normal retirement (age 66) benefit exceeds the cumulative early retirement (age 62) benefit. My age 62 vs. 66 calculation had a break-even age of 79+ and 66 vs. 70 showed an 81+ break-even age.

So, assuming I live to age 77, waiting until age 66 to begin receiving benefits is a smarter decision. But, will I live that long? Ah – the website can help there also! There is another link called “period life table” showing that at my current age of 55, statistically, I have about 24 years to live. Well, that was rather sobering. OK, that puts me at age 79, so there wouldn’t be much advantage to waiting. Of course, if I lived to 85 or 90, waiting until age 66 begins looking more interesting.

One drawback to the break-even age calculator - it doesn’t take into account investing the early-retirement money and earning interest on it. If I factor that into the calculation, what’s the impact on my break-even age? Using a conservative 4% interest rate, my 62 vs. 66 break-even age is now pushed out from 77 to 83, making the early benefit choice look even better.

Of course, there are many other factors to consider. If you are still working at age 62, earning more than a certain amount ($12,960 for 2007), your social security retirement benefits are reduced $1 for every $2 earned above the threshold.


Apply for Social Security Benefits Online

Wait in line no more – take advantage of Social Security’s online retirement application. You can apply for retirement benefits from the convenience and comfort of your home or office.

Here’s how to apply online for Social Security benefits.

First, go to the Web site at www.socialsecurity.gov/applytoretire. Here, you can apply online not only for your own retirement benefits, but also for your spouse if they are also eligible.

The online application will be signed electronically. Now, you may think, “I don’t know how to do that.” But it’s easy. Signing electronically just means that you accept responsibility for the accuracy of the information you submitted by selecting the “SIGN NOW” button at the end of the application. This electronic signature also authorizes Social Security to complete the processing of your application for benefits.

You will still need to submit appropriate documents to prove your age, citizenship and, in some cases, earnings and marriage.

Please see the information above about online Retirement Planners. This site also provide links to outside websites that discuss other sources of retirement income and post-retirement concerns, such as housing and medical care.

For more information about these and other Social Security retirement topics, visit www.socialsecurity.gov

Gerald A. Townsend, CPA/PFS, CFP®, CFA® is president of Townsend Asset Managment Corp., a registered investment advisory firm. Email: Gerald@AssetMgr.com.