Retirees rethink Social Security in tough economy

August 7, 2009

CHICAGO (AP) - Many Americans are living on the edge these days, and that means more are opting to take Social Security early. The potential consequences for them down the road are troublesome.

Applying for benefits as soon as eligibility begins at age 62 obviously brings an immediate payoff in the form of monthly checks that won't stop until you do. Who knows if you will live long enough to come out ahead if you delay?

The downside is locking in smaller amounts for life at a time when people are living longer and retirement can last for decades. For that reason, it's best to make deliberate calculations and give careful consideration to waiting until you can collect as much as 75 or 80 percent more per check.

Still, a move that often should be delayed as long as possible has become a routine step for many during the recession.

The evidence: a big spike in early-retirement claims for Social Security. Through last week, applications for benefits in the current fiscal year were up 23 percent over a year ago.

Part of the increase is attributable to Baby Boomers and the increasing percentage of women reaching retirement age after joining the workforce en masse only a few decades ago. But Stephen Goss, the Social Security Administration's chief actuary, says applications are still running about 7 percent above expectations because of the economy.

The average age when people start collecting Social Security is 63.6, based on the most recent calculation. That is likely to drop after this year's barrage of claims is factored in.

Financial planners report fielding many more calls from clients who are rethinking their Social Security plans.

Social Security checks are about 25 percent less for each year you retire before full retirement age, which is 66 for those born from 1943 to 1954. After full retirement age, the monthly benefit will increase by 8 percent for each year you delay.

A good place to start researching the issue is the Social Security Administration's Web site (www.socialsecurity .gov/estimator), which has a discussion on when to start receiving benefits as well as a retirement calculator. If you don't have your annual statement from Social Security, you can find the amount of your estimated benefit there.

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