When should you claim? It's a straightforward question with no easy answer.
While the Social Security program lets you tap into payments as early as age 62, payouts increase every month for those who wait, until you reach 70. For most people, it pays to delay receiving Social Security benefits until at least their full retirement age. (For the boomers, that's 66 to 67.)
But most people don't get that math. Or they simply feel they need the dough now and a bird in hand is worth more than the uncertainty about the future payouts. Or they figure, without a foolproof crystal ball, they might not live long enough to justify waiting it out for the future reward anyway.
Little wonder that, nearly three-quarters of individuals took payouts before age 65, according to a recent General Accounting Office study.
Ah, if only they could hold-off and delay gratification. Monthly inflation-adjusted benefits received at age 70 are increased by at least 33 percent compared with taking them at 66, according to the study.
Until this year, I have relied on the Social Security Administration's annual mailing of my Benefits Statement to show me this fact in plain black and white. Maybe you did too. It contained a summary of my earnings history and estimated retirement benefits at various ages, and showed me those figures. Then I would stash it in a file and forget about it. (At 50, I'm still years from retirement.) My guess is you just stashed it, too.
But that handy resource has vanished at least for now. In April, "in light of the current budget situation," the SSA suspended issuing annual Social Security benefit estimates in the mail for most U.S. workers. However, workers can still get an estimate of their projected retirement benefits based on their actual work history at www.ssa.gov/estimator.
That's still a viable place to go, of course. And you may need it, when you tap into the new AARP Social Security Calculator. The AARP tool offers a more complete view of what you can expect than the SSA did anyway, and AARP pulls from the Social Security Administration's calculations as their source, so these are not pie in the sky estimates.
Of course, since everyone's personal situation depends on variables such as health, employment, lifestyle and savings, there's no set age that is right for everyone. But there's no denying that the later you decide to claim, the greater the potential benefits may be.
This morning I took a spin through the AARP calculator and compared it to my last Social Security statement, and it was pretty close in terms of monthly benefits at age 62, 67 and 70, plus I could play around with the numbers to run different scenarios.
I like it. It walks you through a simple, question-and-answer format and provides estimates for both monthly and lifetime benefits across a range of ages. It also allows you to customize by calculating spousal benefits and taking into account the impact of continuing to work while receiving benefits.
There's a section to compare estimated monthly benefits to expected expenses in retirement from housing to clothing. The calculator assumes inflation of 3 percent and an annual raise of 2.5 percent from now until you retire, but you can reset defaults.
You begin by typing in your birthday and your spouse's if you're married and annual salaries. Next, fill in your estimated Social Security benefits. I used my last statement from SSA, but you will probably need to go to the SSA's estimator.
The calculator proclaimed I would get maximum benefits if I claim Social Security at 70 versus my full retirement age of 67. The difference between receiving benefits at age 62 and age 70 was nearly $1,000 a month.
There's a section that explains how to maximize your benefit if you're married, too. In my case, my husband is older, so he should apply at 70 for his own Social Security payment, and then when I'm 67, I apply for spousal benefits. At 70, I apply for my own. I think I have that straight. The calculator provided the specific monthly benefits. You can also click on an explanation of how this works.
What if I claim and keep working? If you need to claim benefits before full retirement age, in my case, 67, you can continue to work, I am told. And here's what will happen. "If you claim and work before age 67, your benefits may be reduced or withheld. However, your benefits will be returned to you after age 67."
You can click on an interactive chart and see what happens to your earnings when you claim earlier or later while you work. From age 62 (when I could claim), until full retirement age (67), $1 would be withheld for every $2 I earn above $14,160 in 2011. This would be $39,600 withheld from your benefits, returned after full retirement age.
At the end of the calculator, you make a decision about when you think you will apply for benefits based on what you have learned. You choose age and click to get a personalized statement that you can download to your desktop and print out then stash in a file.
Oh yeah, I also learned I have an 85 percent chance, based on my age, not adjusted for family history, of living to 80. Given that my Grandmother lived to 99 and Dad to 89, I believe that's a good possibility, all things considered.
To try out the new AARP Social Security Benefits Calculator, visit www.aarp.org/socialsecuritybenefits