First Person: Running the Numbers on When to Take Social Security

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There is a lot of talk out there about when exactly people should take their Social Security benefits. Well, I have news for you. Unless you have a crystal ball and know how long you're going to live, or you're rich and you don't need such benefits, then there's probably no exact answer to the benefits dilemma. However, in the study of my own benefits as well as my wife's, I have come to some interesting conclusions regarding our own Social Security benefit timeline.

Where to get data

For those of us who aren't close enough to retirement to still get paper benefits statements from the Social Security Administration, there is the website. This is where I can get current (or at least based upon the most current tax returns I've filed) information of annual earnings and future Social Security benefits estimates. With this data, I prefer to base estimates on current dollars rather than any sort of future dollar estimates based upon inflation, since cost of living adjustments aren't a guarantee.

Pulling age points

For my estimated retirement ages, I use 62, 67, and 70. While I don't expect that by the time I reach retirement age (since I'm in my mid-30s), the lower of the three values will still be around, it at least provides me with a general idea of what the numbers might look like at particular age points, whether they are those mentioned previously or something more along the lines of 67, 72, and 75.

Evaluating payment amounts, longevity, and income need

So how to evaluate earnings over time? Well, personally, I pick a longevity point of 80 years old. This way, I can determine exactly how much money -- based upon payment estimates and not factoring in any cost of living adjustments -- I will have earned from the ages of 62, 67, and 70 until age 80. Sure, my payments will be larger taking my benefits at age 70, but I will have 96 less of them as compared to taking lesser payments at age 62.

In this way, I've determined that I would actually earn over $2,000 more taking lower payments starting at age 62 through age 80 than if I waited until age 70 and lived until age 80, and my wife would earn over $3,000 more under similar circumstances.

Not a tough calculation

You don't have to be any financial analyst or mathematician to run these numbers. It's really a simple act of finding out estimated monthly benefits and multiplying them from different retirement ages until a set longevity point. The only downside -- and really the hardest part -- is determining just how long we're all going to live.

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The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute legal or financial advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.


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