Planning Briefs

When To Take Social Security Is An Important Decision

Published Tuesday, January 26, 2010 at: 7:00 AM EST

You’ve been paying Social Security tax your entire career, so it’s only natural to look forward to the promised “payoff” in retirement. But Social Security isn’t like other promises from the government. The benefits you’re entitled to receive are actually a unique asset and should be considered in your investment planning.

The full retirement age for those born from 1946 through 1954 is age 66. It gradually increases to age 67 for those born between 1954 and 1960. If you choose to start receiving Social Security benefits at age 62, you’ll get your money sooner, but the monthly benefit will be reduced by 25%. On the other hand, if you wait until age 70 to start receiving benefits, the amount is increased by up to 8% per year, in addition to annual cost-of-living hikes.

Let’s say your monthly benefit at the full retirement age of 66 is $1,000. Taking early retirement benefits at age 62 results in a permanent decrease to $750 a month. But waiting until age 70 would produce a monthly benefit of $1,320, a 32% increase.

Waiting to begin benefits isn’t the best approach for everyone. Whether you should or could do it depends on numerous factors, including your current and anticipated cash needs, your health status and family history, if you plan on working during retirement, other sources of retirement income, and the projected amount of your Social Security benefit. We’ll consider all these factors and help you decide how best to utilize this asset.

This article was written by a professional financial journalist for Preferred NY Financial Group,LLC and is not intended as legal or investment advice.

An individual retirement account (IRA) allows individuals to direct pretax incom, up to specific annual limits, toward retirements that can grow tax-deferred (no capital gains or dividend income is taxed). Individual taxpayers are allowed to contribute 100% of compensation up to a specified maximum dollar amount to their Tranditional IRA. Contributions to the Tranditional IRA may be tax-deductible depending on the taxpayer's income, tax-filling status and other factors. Taxed must be paid upon withdrawal of any deducted contributions plus earnings and on the earnings from your non-deducted contributions. Prior to age 59%, distributions may be taken for certain reasons without incurring a 10 percent penalty on earnings. None of the information in this document should be considered tax or legal advice. Please consult with your legal or tax advisor for more information concerning your individual situation.

Contributions to a Roth IRA are not tax deductible and these is no mandatory distribution age. All earnings and principal are tax free if rules and regulations are followed. Eligibility for a Roth account depends on income. Principal contributions can be withdrawn any time without penalty (subject to some minimal conditions).