Opinion on When to Start Collecting Social Security

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The short answer - As soon as you can! Why? A bird in hand is worth two in the bush.

First, actuarially speaking, assuming you live to be 100 years old, the actual amount of money you'll get from Social Security over your lifetime will be the same whether you start collecting at 62 or 72.

So just like having too much taxes withheld from your paycheck, you're just giving the government a long-term interest-free loan by waiting.

There is a "breakeven point" if you wait to collect. But the total difference is only in the thousands of dollars. If you start collecting at age 62, and invest it, then you'll have several times as much as what you would have gained by collecting after this breakeven point.

If you work, and your benefits are lowered, they are raised to make up for it when you reach full retirement age. So actuarially, if you live that long, you still get the same amount of benefits. A page on Social Security's website explains it here: http://www.ssa.gov/pubs/10069.html

Second, if you decide to wait because you want the higher monthly income later, you'll probably pass away before you see any money. So you should start getting it ASAP.

This is because if you do pass away, then you would not have collected any money. If you take it ASAP then the money you'll have received until you pass away is money you would not had if you decided to wait.

Third, general government mismanagement. They could just continue to screw things up, and then just decide to not pay anymore. Somewhere between this drastic scenario, and the rosy scenario you hear when them speak, is probably the reality - which are reduced benefits from things like "Inflation minus 1%."

This means if annual inflation (consumer CPI) is 3%, then instead of your benefits going up 3%, they're only going to go up 2%. This adds up to major bucks over long periods of time. If this happens, then the longer you wait, the more you lose.

Anyway, no matter how you look at it, the forecast is for less and not more over time, so get as much as you can of it while you can. The longer you wait, the less you'll get.

The only way to "fix" the disastrous imbalance in revenue vs. promised benefits is to cut benefits. This will have to happen someday. So you should get it while you can, because the longer you wait, the higher the chances are of getting lower benefits.

Fourth, if you don't need it, and are whining about paying higher taxes - know this: You don't make more money by waiting, other than the COLA (annual Cost Of Living Allowances) that adjusts for inflation.

So if you wait, you don't win anything at all - you just keep up with inflation. If you take it ASAP, and don't need it, then you'll still be ahead of the game if you pay whatever taxes it costs, and then invest it getting any rate of return over the rate of inflation and taxes (which is around 5%). So by putting it in a short-term bond fund, you'll win the game.

Last, but not least, something may happen where you'd need the money. So if you waited, then all you're going to get is the monthly payment if you change your mind, fill out the forms, and wait for it to kick in.

On the other hand, if you got it ASAP, and saved it, then it will be there in an account you can tap whenever you need it.

No matter how you look at it, you win on all fronts if you take it ASAP, and you lose on all fronts the longer you wait - even after paying a little more in taxes.

So our advice is to take the "reduced benefits" the very first month you can, usually around your 62nd birthday.

Go to Social Security's website.

The Social Security Administration offers their online benefit calculator to anyone now. Their CD is $51, but it's available by free online downloading from this page (click here).

Their program is called AnyPIA (Primary Insurance Amount) and is better than commercial programs that calculate Social Security benefits.

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