One of the first lessons of financial planning is that you shouldn’t base your retirement future on the prospects for the Social Security system, or for that matter, your work-related pension.

Independent planning is always necessary, and a team approach is a good idea, blending the skills of qualified financial planners, tax professionals and estate attorneys.

But if you’ve spent a lifetime paying into the system — or if you’ve merely started your working life — it’s wise to check out Social Security projections so you can get a reality check on the size of that benefit.

A good starting point is the Financial Planning Association’s new Social Security Predictor, a web tool that allows you to compute your benefits based on your age and current projections for the future funding of the system.

Once you’ve gotten an idea of the amount you’ll be getting from Uncle Sam, the next important question is how long can you wait to start drawing on the system. You need to explore this for three reasons:

  1. You’ll have time to assess your career preferences — not everyone wants to retire at their first opportunity, particularly if they like their jobs. 
  2. The longer you wait to take Social Security, the greater your monthly benefit will be. For example, if you were born between 1943 and 1954, you can start tapping benefits at age 62, but you’ll get only 75 percent of your benefits based on the current projected retirement age of 66. And the reduction is permanent, so it won’t increase when you reach full retirement age. In addition, there are severe restrictions placed on how much you can earn if you continue to work.
  3. Simply looking at these facts will allow you to focus on whether your mixture of personal savings and investments, your work-related pension funds and the government’s money will be enough to live on.

Here are some critical things you should know before making your decision when to get benefits:

Start with advice: There is no standard, one-size-fits all answer to this question. A trained financial planner will be able to look at your overall situation with regard to the retirement you want to have and the goals you hope to meet and determine where the money should come from to support you and at what time. It’s also critical to meet with your tax adviser (Social Security payments CAN be taxable) and your estate planner or attorney.

Most of the decisions you’re considering will have tax ramifications and you want to make sure you can manage the taxes and not damage the estate you want to pass on to your spouse or children after your death.

Watch your earnings: If you start collecting benefits before your official retirement age — which may be a moving target in the future — you’ll face restrictions on how much you can earn from a full- or part-time job if you continue working.

When is it OK to take Social Security benefits early? Obviously, if you can’t make ends meet, you need to consider the option. It’s possible that it might make sense to draw benefits if you can allow tax-deferred investments to grow until the point you absolutely need to start drawing on them. Also, if you are in poor health and don’t expect to live until retirement age, Social Security benefits may help cover medical costs or other expenses. Or, if you are the lower-earning spouse, it might be advantageous to take benefits before your higher-earning spouse.


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