The Right Time to Take Social Security: A Go-To Guide
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The Fiscal Times
October 11, 2013

Dear Beth, I retired at 58, work part time, and have a net worth of $1.3 million, including investments. When is a good time for me to collect Social Security? –Birdie

Dear Birdie, First of all, congratulations on amassing a decent retirement nest egg and for continuing to work part-time as your retirement begins.

Doing those two things puts you ahead of many of your peers when it comes to retirement preparation – and  it’s smart to start thinking strategically about when to tap your Social Security benefits. Social Security can be worth hundreds of thousands of dollars throughout a lifetime, and for many people, it represents their only retirement income stream that’s designed to increase with inflation.

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For most retirees, it makes sense to wait as long as possible to start receiving Social Security to collect as big a check as possible, especially if you can live off earnings from a job instead of starting to draw down your nest egg. But every individual’s circumstances are different.

 Here are three factors to consider:

1. Does your part-time job make you subject to the ‘earnings test’?
If you’re under full retirement age and are still working, your monthly Social Security check will be reduced by $1 for every $2 you make above $15,120 this year. “If you’re age 62 to 67 and still earning a significant paycheck, the earnings test is a very compelling reason to avoid taking Social Security,” says Tim Maurer, director of financial planning at The Financial Consulate in Cockeysville, Maryland.

The year you reach full retirement age,  you can earn up to $40,080, and your Social Security check will be reduced by $1 for every $3 you earn past that. Once you’ve gone beyond full retirement age, the earnings test no longer applies.

2. How long do you expect to live?
Remember, you can take Social Security at any time from age 62 through age 70, but every year that you wait, your checks will be worth more.

So, at age 62, you’ll only get 75 percent of what you could collect at full retirement age. A 62-year-old retiring in 2013 eligible for the maximum benefit would get $1,923 per month, versus the $2,533 monthly check received by someone of full retirement age.

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Continuing to delay collection of Social Security until after your full retirement age will net you 8 percent more per year – that’s  a guaranteed return you’re unlikely to find anywhere else. “Assuming you’ve got an average or longer-than-average life expectancy, you’ll want to wait until age 70 to take Social Security,” says Bill Reichenstein, author of Social Security Strategies.

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On average, a man reaching age 65 today can expect to live until 84, according to the Social Security Administration. One out of every four 65-year-olds will live past age 90; and one in 10 will see 95.

If, however, you’re in ill health or have some other reason to believe you won’t reach those ripe old ages, starting your Social Security benefits early may maximize the amount you’ll collect, since you may not live long enough to realize the full 8 percent return.

3. How long do you expect your spouse to live?
If you’re married and earned more than your spouse during your working years, you’ll want to also consider how long you expect him or her to live. It’s because after the higher earner passes away, that person’s benefits get transferred to the spouse to collect until his or her death.

If your spouse is much healthier or much younger than you, waiting to collect your Social Security benefits will ensure that he or she receives a larger monthly check after you’ve passed away.

Life + Money Editor Beth Braverman covers all things personal finance. Formerly a senior reporter and social media editor at MONEY magazine, she’s also held gigs as a newspaper reporter and trade magazine editor.