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Deciding when to tap Social Security benefits is function of longevity

Beneficiaries can get 75 percent of their full Social Security benefit at 62 years old, and payments increase 8 percent each year.
BY MALCOLM BERKO Modified: January 30, 2014 at 10:07 pm •  Published: February 2, 2014

Dear Mr. Berko: After 29 years, we sold our business last November to relatives for all cash, plus we got a 10-year note that pays us $2,100 each month. Now we've retired. I will be 62 this April, and my wife will be 62 this June. We plan to close our condo door and take our 4-year-old motor home across the country to visit family in Missouri and old friends in California and New Mexico. Our big question is when to take our Social Security income checks. Should we take our checks now and get about $1,700 a month, or should we wait until we're 66, when we'd both get about $2,300 a month?

BR, Erie, Pa.

Dear BR: Sometimes relatives are the worst people with whom to do business. It's good to have all cash, and I hope the 10-year note turns into cash, too. A couple of times a year, I get a letter from a reader who wishes he could turn back the clock. Therefore, I will take that into consideration.

How much longer do you both plan on living? No, I'm not trying to be gloomy, but this question has nothing to do with buying General Mills, mutual funds, ETFs or U.S. Treasury bonds. Because we are talking about retirement benefits for the rest of your life, the most important factor to consider is how long you expect to live. If you've been in the workforce for a minimum of 10 years, you're eligible for benefits at any time after age 62. The earlier you begin taking your benefits the less income you'll get each year; that monthly income increases the longer you wait, up till age 70. The normal retirement age is 66, at which time you are entitled to 100 percent of your stated normal benefits. If you begin taking Social Security benefits at age 62, the government will cut you a monthly check for 75 percent of the normal benefits. But if you can afford to wait till 70, your Social Security checks will increase to 132 percent of the normal benefits. Each year you wait from age 62 to 70 increases your monthly Social Security check by 8 percent. And in this market, an 8 percent increase in one's monthly income each year ain't chopped liver.

The Social Security folks don't give a hoot or a holler when you begin your monthly benefits. Folks who take their incomes at 62 get lower monthly payments for longer periods of time, whereas those who take payments at age 70 get higher monthly payments for shorter periods of time. The costs to the Social Security system are basically identical. But remember that your benefits increase 8 percent each year you wait from 62. Of course, if one decides to take benefits at 62 and still is working, there are some penalties he must pay, but because you're retired, that's not germane. At 66, there are no penalties, but those things can change.

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