New Estimator Can Help Determine When to Take Social Security Benefit

Photo by AP Photo/Stew Milne

If you’re wondering when to take your Social Security, it just got a whole lot easier to analyze your options. A recently launched online retirement estimator from the Social Security Administration enables workers to instantly view their expected levels of Social Security payments for all possible retirement ages.

The move comes as nearly 80 million baby boomers approach retirement and are making the decision on when to start drawing on the Social Security system.

About half of today’s workers take their benefits at age 62, but financial experts are increasingly advising people to hold off. If you can afford to wait to take Social Security and you expect to live several more years, the increased benefits may be worthwhile, they say. Every year you delay between the ages of 62 and 65, your benefits increase about 5 or 6 percent. After age 66 your benefit increases 8 percent every year. That can make a big difference, says Jan Dahlin Geiger, a certified financial planner at LongView Wealth Management in Atlanta, Ga.

Geiger uses the example of one of her clients, who is slated to receive $1,400 a month from Social Security if she retires at age 62 or $2,775 if she waits until age 70. If Social Security benefits increase 3 percent a year, at age 80 her benefits will grow to $2,383 if she retires at 62, or $3,729 if she waits untils she’s 70. At 90, early retirement will yield her $3,203, while later retirement yields $5,012.

“Of course, you received money [on the first one] for that first eight years, but if you think you are going to live into your 80s and 90s, you certainly are going to appreciate that larger check later,” Geiger says.

More than 50 million Americans will receive nearly $614 billion in Social Security benefits this year. According to statistics for 2007, the number of recipients was just under 50 million, and included about 34 million retirees and their dependents, 6.5 million survivors, and 9 million people with disabilities and their dependents. The average monthly payment for retirees was $1,079.

Geiger advises retiring whenever you have enough money to live the way you want to for the rest of your life, considering that inflation will be about 3 or 4 percent and that your long-term investments can earn roughly 7 or 8 percent a year. “For many people, this means they will be working until age 70,” Geiger says.

Jean Setzfand, director of financial security for AARP, who also recommends waiting as long as you can to tap Social Security, says it’s important to have a realistic picture of your finances and cost of living.

“Because of the downturn in the economy, people are more sensitive about their financial future and it’s a good time to take a look at your financial situation,” says Setzfand. An online tool, like the AARP Bulletin’s retirement calculator, can help you determine how much money you’ll need.

Meanwhile, the new Social Security estimator can help you determine how much you can expect from Uncle Sam.

Here’s how it works: Log onto www.socialsecurity.gov/estimator. Simply enter your name, date of birth, Social Security number, mother’s maiden name and your place of birth into the estimator. If it matches information in the administration’s database, then the system will display what you would reap based on your current earnings, depending on when you choose to retire. Further, you can find out how your Social Security payments might change if your earnings increase or decrease in the future.

While the Social Security Administration has long had an estimator on its website, this is the first time that it’s been automatically linked to data about each individual. Previously, you had to input earnings information on your own. Essentially, it takes the information that you get each year on your mailed paper statement and makes it interactive.

The estimator is part of a comprehensive effort by the Social Security Administration to have a more effective online presence to respond to consumer needs. The tool will help those who are facing the important decision of when to retire.

“It is simple, easy to use and will provide highly accurate benefit estimates for those nearing retirement age,” said Michael Astrue, commissioner of Social Security. “For younger workers, it will provide valuable information to help them plan and save for their retirement.”

Michelle Diament is a regular contributor to the AARP Bulletin. Her work has also appeared in People and The Washington Post Magazine.