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Aug 13 2012 12:00AM

 

Question

I will be 62 years old in six months and I have had two serious health issues in my adult life. I have two children aged 14 and 17. My question is this: Am I better off taking Social Security when I turn 62 including dependent payments for my kids or am I better off waiting until age 64 or 65?

Answer

The timing of Social Security payments can be critical since it’s often one of your most important assets.  The strategy for optimizing it, therefore, is very important.  Asked another way, ‘How do we maximize your lifetime benefits?’

I’m assuming your single and not widowed.  If not, the answer might change.  Your children must be unmarried (obviously the 14 year old is) and be under the age of 18 (19 if a full-time student in high school) unless they’re disabled to qualify. As such, I’m also assuming they meet these criteria. Once your 17 year old turns 18, unless a full-time high school student, his/her benefits will cease. I’ll also assume we’re only talking about benefits for your 14-year old, which would only last another four years or so. 

The answer depends, then, on how long you will live so that benefits can be maximized.  Without a crystal ball we obviously don’t know.  What we do know is that your 14-year old is entitled to 50 percent of what’s called your Primary Insurance Amount (PIA) and your full retirement age (FRA) is 66.  So let’s use two examples.

Example #1:

You claim at 62. Your PIA at NRA is $1,000/month. Your 14-year old will receive $500/month and you would receive a permanently reduced amount of $750/month for a total of $1,250/month.  At age 66, you will only be collecting $750/month (your child turns 18).

Example #2:

Same as above, but you wait until NRA of 66 to claim. You would receive $1,000/month. Your children would get nothing.

The difference here is that in example #1 you receive an extra $1,250/month from age 62-66 for a total of $60,000 because you claimed benefits four years sooner.  In example #2, you receive nothing until age 66 when you begin receiving $1,000/month.  

In the above examples, if you live to 86 or longer, it pays to wait to claim until you’re 66.  That would be the age where you breakeven and begin collecting a cumulatively higher amount of benefits.

As you can see it can be complicated. I definitely would contact Social Security and arrange for an appointment with a benefit counselor at a field office in your community. Social Security benefit counselors cannot provide financial advice or recommendations, but they can provide information specific to your situation. 

A CERTIFIED FINANCIAL PLANNER™ (CFP®) professional from the Financial Planning Association can develop a comprehensive financial plan to help you make the best choice for your situation.

 

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