How to Make Intelligent Social Security Choices By Robert Margetic

You'll need to make two critical and likely irreversible decisions when you qualify for Social Security. If you are married, you'll need to decide if your spouse will be added to your monthly income benefit, and if you're married or single you'll need to decide when to start your benefits.

Generally, you should add your spouse to your monthly benefit. Yes, you do end up with a lower monthly check but the checks should, on average, last longer as it covers both of your lives. Statistically you end up with the same total household benefit but you get the comfort in knowing that both you and your spouse have an income source you can't outlive.

There are times when you might not want to follow this general rule. Consider a single life benefit choice when:

• Your spouse is severely ill and unlikely to outlive you
• Your spouse is significantly older than you
• Your spouse has plenty of assets and doesn't need the income

Deciding when to begin your benefits is a bit more complicated. Full retirement for most people now is age 66. If you start your benefits early, the earliest age is 62, you get a 6 ¼ percent reduction in benefits for each year you are under age 66. For example, if you start your benefits at age 62 your monthly benefit is reduced by 25 percent.

On the other side, you get an 8 percent increase in benefits if you delay taking them after age 66 up to age 70. At first blush, it seems if you don't need the money now, you can simply wait and get the automatic pay raises in the future. In fact, many articles in the media suggest you do this. But, they miss some critical points of finance.

When you start your benefits at age 62 you get four years of paychecks before you reach age 66. A $2,000 a month benefit can land you roughly $100,000 in likely tax free cash before you would start getting the higher benefit. In a typical case, it would take 12 years of the higher payment option before you breakeven with taking the cash sooner.

That's before considering you can earn interest on the $100,000. If you got 3 percent interest on that money, your new breakeven would be closer to 19 years after you reach age 66. You would be better off waiting to take the larger benefit if you are highly confident you will live well beyond 85.

It's usually better to have money today than tomorrow. A lot of things can change over time including whether or not Social Security benefits will hold for the next 20 - 30 years. Either way it's a tough choice where there is no one answer for everyone.

Consider taking your benefits early if:

• you need the money,
• your savings are low,
• you have a lot of consumer debt,
• you don't expect to live to the breakeven age,
• you expect Social Security benefits to be cut,
• you can earn more than 3 percent on the savings.

Considering delaying your benefits if:

• you are still working and don't need the money,
• you have substantial savings,
• your benefit covers a small part of your overall monthly expenses,
• you expect to live well beyond the breakeven age,
• you want to leave a higher benefit to your spouse.