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Securing Your Retirement: It Starts with the Right Timing

It used to be that if you asked people when they were going to retire, the answer was easy: 65.

Today, though, it’s best to develop a strategy on the timing of your retirement, taking into account your personal financial situation, lifestyle preferences, the economy, and the variations in Social Security benefits depending on how old you are when you retire.

All too many people put no thought into taking Social Security. If they retire early, they start taking benefits at age 62, the earliest you can receive a payout. However, that means they will receive only 75% of their full benefit. Other people wait for what is defined as the full benefit, which for people born between 1942 and 1954 is age 66.

Another option is to wait until age 70, which means you will earn a 32% bonus plus all accumulated cost of living adjustments. If you are from a family that lives beyond the normal life expectancy and you expect to do the same, the increased payout over your lifetime is huge. Also, that increased benefit goes to your spouse when you die. A spouse who has never worked in a wage-paying job is entitled to a payout equal to 50% of the wage-earning spouse’s payout.

For couples where both spouses earned Social Security benefits, the strategy can be more complex. As noted in the U.S. Census Bureau’s 2010 Statistical Abstract, women generally have a longer life expectancy than men. If the husband is the higher earner, one strategy to consider is for his wife to start receiving benefits at age 62, and he would start receiving benefits at age 70. By waiting until age 70, the husband receives a larger benefit, which can later go to his wife.

It pays to do some research and think about the best time for you to begin collecting Social Security. The Social Security Administration website provides basic information to help get you started. You can go over your strategy with a financial planner.

If you’ve retired, do you have any recommendations for others who may be considering this issue?

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Posted in Reaching Retirement.

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