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How Do We Decide When to Start Our Social Security Benefits?

Deciding when to take your Social Security benefits requires understanding your choices and recognizing the emotions that go into the decision. Like many decisions about money, if we are not conscious of our feelings we may be overly influenced by them and not pay enough attention to the numbers.

Suzanne Shu and John Payne's research study as described in Squared Away Blog, (Retirement Research Consortium, September 26, 2013) explored why many people choose to begin receiving their Social Security benefits before full retirement age. "Full retirement age" is the age at which you can receive full benefits without a penalty. This age varies depending on when you were born and may be between 65 and 67 years old. The study found that how long people expected to live affected when they started benefits: 10 years added to a person's life expectancy resulted in delaying filing for benefits by six months.

Before you make a decision about filing for Social Security benefits, you should clarify your life expectancy and when you will qualify for full retirement benefits. You can do both at the Longevity Calculator. You just might be surprised by how many years you are likely to live! Of course, you need to consider your own health and family history when looking at these numbers.

Another factor in the decision to take benefits early, according to the study, is fear of loss. Waiting to start benefit payments often feels like a loss. But the reality may be different. When you file early, your monthly benefit amount is permanently reduced. For example, if your full retirement age is 66 and you choose to file for benefits at age 62, your monthly benefit will be reduced by 25 percent. If your full retirement benefit amount would have been $1200 a month, the choice to take it early will mean that the monthly benefit amount will be $900 instead - a $300 per month loss for the rest of your life.

The other two factors identified in the study were fairness and patience. The more someone agreed with statements such as "I feel that I have earned these retirement benefits," the more likely they were to take benefits early. And, the more impatient the person surveyed, the more likely they were to take benefits early too. Does this sound like you?

Other factors also influence people's choices such as whether or not they need Social Security benefits before full retirement age to meet basic needs and how confident they are that the Social Security system will not change before they file for benefits. These factors also may affect your decision.

To explore your choices, the Social Security website can provide you with details that take into consideration your situation. Go to "Retirement Planner: Plan for Your Retirement". At this website you can also research how continuing to work while receiving Social Security benefits may affect your payments. Several calculators are linked to from this website; these are helpful too.

Before you decide when to start your Social Security benefits, take time to research your choices and to examine your feelings that may affect your decision.

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Posted by Kathy Sweedler at 8:09AM on 11/18/2013
Categories: Kathy Sweedler Retirement Planning