The Social Security benefits debate: Take it early or wait?

A large part of retirement planning involves guesswork.

And I, for one, am stressed about whether I’m guessing right.

Take Social Security. Experts advise waiting as long as possible, until 70 if you can, to start collecting your benefits. Do this and you’ll get more money. This choice makes sense if you guess correctly and live into your 90s. But what if you don’t live that long? You’ll leave significant money on the table. When you pay into a system your entire working career, the possibility of not collecting what you put in leaves you feeling cheated.

Since the elderly today are living longer, Social Security checks can make a world of difference. Health care is often the biggest expense on a senior’s budget, and even the best insurance plan can leave a gap. Should you become medically incapacitated and unable to feed yourself, bathe or do other normal activities of life, you’ll need help. You may be blessed enough to have children who can pitch in, but at some point, they may need help assisting you. Seeing the cost of a nursing home, assisted-living facility or long-term care aide is enough to make you feel like you’ve been punched in the gut.

This is the reality of growing old in America.

So, to try and make sure you have enough money to stretch throughout retirement, you have to guess if you’re going to get sick enough to need long term care. You have to guess when you’re going to die.

In my weekly Washington Post newsletter, I recently mentioned a discussion that my husband and I have been having. In seven years, I’ll be faced with the decision, and it’s six years for my husband: Do we take Social Security benefits early or wait? Our age for full retirement is 67. There is no point waiting longer than 70 because benefits stop growing.

I want to wait. And, fortunately, we can. We’ve invested well enough that, barring some major financial catastrophe and assuming we pay off our mortgage before we retire, we can fund our senior years through savings and pension payments.

My husband wants to collect early at 62 or soon after. He argues that the extra money could allow us to do more things at a time when we’ll likely be healthier and more energetic. Many seniors do live long, healthy lives, traveling and maintaining active lifestyles. But there’s no guarantee we will survive and thrive like them. My husband has already battled — and won! — colon cancer. I nearly died from a blood clotting condition in my mid-30s.

Upon reading about our debate, Washington Post financial columnist Allan Sloan wrote to me. He’s a brilliant guy and I trust his advice.

“Unless you or your husband don’t expect to make it to your late 70s, I sure wouldn’t take [your retirement benefits] at 62, which would also require that you not have meaningful employment income, because it would reduce the benefits,” Sloan wrote.

We hadn’t factored in this point. You can still work and collect Social Security. But if you haven’t reached your full retirement age, your benefits are reduced by $1 for every $2 you earn above the annual limit. For 2018, the limit is $17,040. If you reach your full retirement age this year, Social Security will deduct $1 for every $3 you earn above $45,360 until the month you reach your full retirement age. Starting with the month you reach your full retirement age, your benefits won’t get docked no matter how much you earn.

What counts as earnings? Social Security considers wages you make from a job, or net earnings if you’re self-employed. Income from annuities, investment income, pensions, interest, capital gains and government benefits do not count. Read more about this issue at Social Security’s website, ssa.gov. Search for “How Work Affects Your Benefits.”

I’ve been hearing a lot from readers on this issue. Robert Meisel of Alpine, California, who turned 70 last year, took into account the very point Sloan made. And he waited. He claimed his benefit at 69.

“I was self-employed, working and earning my normal income,” Meisel wrote. “If I had taken Social Security at 62, I would have been penalized by 50 percent of each benefit dollar until my 66th birthday.”

Fortunately for Meisel, he and his wife had ample savings to help make their choice easer. “I’m pleased with my decision,” he added, “but only time will tell if it was the best financially.”

In the case of this great debate, there’s a lot to consider — cash needs, health, family longevity, taxes and your working status. Sure, you’ll have to guess on some things. But at least make it an educated guess.

— Washington Post Writers Group