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Honey, I Took Social Security Too Early

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Deciding when to take Social Security is one of the most important retirement planning decisions people make - and many retirees say they got it wrong.

As many as 38 percent of 573 retirees surveyed by the Nationwide Financial Retirement Institute, a unit of Nationwide Mutual Insurance, say they regret taking their benefit early, which locked in their lower monthly payment for life, and wish they had waited.

When you look at the differences in their monthly payout, you can understand their remorse. Those who took their benefit early report an average monthly payment of $1,190. Those who collected it at their full retirement age have an average $1,506 monthly payment. And those who delayed collecting their benefit report an average monthly payment of $1,924 (or $734 more than the early payout). The difference between the lowest and the highest monthly checks over 20 years comes to a whopping $176,160.

According to a recent New York Times article, 41 percent of men and 46 percent of women apply for Social Security at 62, the earliest age at which you can take payments.

William Meyer, CEO of Social Security Solutions in Leawood, Kan., which helps clients with claiming strategies, says many retirees take their benefit early - leaving tens of thousands of dollars on the table - because it's too tempting to defer. His strategy generally is to wait.
"For every year you live past 80, it's better to have delayed Social Security until age 70," Meyer says.

"It's better to take some savings early and delay Social Security than to take Social Security early and not dip into savings," he says. "We've seen with thousands of people that when they actually see [different] strategies that generate more retirement income, it changes their [financial] behavior."

Read: When to Claim Social Security Benefits

Mikki Waid, a senior strategic policy adviser at AARP, says Social Security is complex and it's to everyone's advantage to understand how different claiming scenarios produce higher and lower payouts. She used an example of a couple in which the husband, who was the breadwinner, died before his wife.

"None of us likes to think about death," she says. "However, I am sure everyone would want to ensure that their spouse has as much money to survive on as possible. If the husband claimed retirement benefits at age 62, then after his death, his wife would receive a lower survivor benefit than if he had claimed his retirement benefit at age 66 or 70. So not only does claiming early lower your own benefit for life but it can also lower the benefit of your spouse in the event of your death."

Laurence Kotlikoff, an economics professor at Boston University who also writes a column for PBS about maximizing Social Security benefits, says he has three rules for getting the most out of Social Security.

They are:
  • Delay to get a better deal.
  • Make sure you time when to collect so that it doesn't diminish a spouse's benefit. (If you take your retirement benefit at the same time you take a spousal benefit, one of the two benefits will zap the other, either in full or in part, he says.)
  • Make sure you know all the benefits you may be entitled to (such as survivor benefits).


The amount that Social Security provides in retirement is based on your work history. However, the benefit amount collected by more than one-quarter of those polled apparently was a surprise: They say their payment was less than they expected.

If you're wondering how important Social Security benefits are to retirees' financial picture, consider that their monthly government check makes up at least 50 percent of the total income of more than half of all married couples and 74 percent of single people, according to the Social Security Administration.


 Photo: Liliboas/istock

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