Entitled to Know

Ask Mary Jane. NCPSSM Contributor: Mary Jane Yarrington, Senior Policy Analyst

It seems like such a simple question but a quick Google search this morning gave me 17 million links with answers to this single question. It’s a complicated topic to deal with -- even for the experts.

Generally, I don’t suggest applying for Social Security early in order to maximize lifetime benefits because that is betting against your own longevity. For some, that might be the right course but all too often taking benefits early will cost retirees who live longer than “average”.

The Motley Fool just posted an interesting discussion on this topic. Although the reference, “Its (Social Security) payouts are not guaranteed” was certainly arbitrary. As current retirees can attest, 401K and pension payouts these days are also far from “guaranteed.” In fact, I would argue benefits backed by the US government are far more reliable and predictable than struggling pension plans and the volatile Stock Market. I also think the number of years used in this discussion was too short. The starting point of benefits is only half the equation. The ending point (life expectancy) is equally important.

“Average” life expectancy from age 65 is about 19 years for women and 17 for men. The question is, where will you fall on a longevity continuum that runs from 62 or 65 to 100+? Live longer than “average” and you are on the losing side of that bet.

Applying early also bets against the longevity of your surviving spouse if you are the major wage earner. A surviving spouse inherits (or retains) whichever of their two Social Security benefit checks is the greater amount. You retire early and your widow(er)’s benefit is capped regardless of the age at which he or she begins a survivor benefit.

Early benefits might not look like such a great idea to a 90 year old widow struggling to get by on reduced Social Security benefits and, at best, half of your pension -- a pension that likely has not been cost-of-living adjusted since the day you retired.

The Social Security Administration lets you check the “break even” point for your own benefit. My best advice is do your homework and be skeptical of anyone who tells you taking benefits early is always the best way to go.

Got a question? Link to my Ask Mary Jane form, submit your question and I’ll be glad to help.