With Memorial Day now come and gone, summer
is really here. Flowers are blooming, birds are singing, and the outdoors is
calling. It’s nice to feel somehow
younger and full of energy. So, now is as good a time as any to bring you back
to earth and give you some good advice about taking your social security
benefits. And don’t worry, Congress isn’t about to do away with benefits for
the largest voting block out there.

Many people want to get their hands on their
benefit as soon as possible, which is when you turn 62 years old. Unless you
(1) really need the money to live on and cannot do some kind of part-time work
for additional income or (2) you have serious health issues or genetic
predispositions to a shortened life expectancy, I suggest you not take your
social security payment until you at least reach your full retirement age. Full retirement age is between 65 and 67
years old depending when you were born. By waiting until full retirement age to
take your benefit you gain an additional 25 percent-30 percent of benefit each
month.

A general rule of thumb is that if you expect to live until
at least 78 years old, then don’t take your social security benefit until you
reach full retirement age. The
several years of benefit you give up between early and full retirement age will
be more than made up for by the much higher monthly payment you will receive at
full retirement.

For example, if your benefit at early
retirement age of 62 is projected to be $1,400 each month, at full retirement age
of 66 it would be about $2,000 each month. That $600 difference each month really adds up. If you live
till 80 years old and you had waited until full retirement age of 66 to take
your benefit, you will have had $33,600 more dollars to spend then if you had
started dipping in at age 62.

It gets even more dramatic if you can wait
until age 70 to begin taking your benefit. In our example, the benefit at age
70 would be about $3,000 each month, that’s more than double the amount you
would get at early retirement. Collecting every month until age 80 would realize
a gain of $57,800 more than if you started at age 62 and $24,000 more than if
starting at age 66.

So, I think you get the picture. If you are
healthy, had long-lived parents, and do not need the extra money, delay taking
your social security check as long as possible. Though, you must start taking
it at age 70.

One more snippet for you married folks. There
is a strategy called “file and suspend” that is quite useful for married
couples who can afford to delay taking the older spouses benefit. Let’s assume in this example that the
husband, Joe, and wife, Jen, are 66 and 62 years old and Joe made a lot more
money in his career than Jen did. Joe
and Jen are healthy and can afford for Joe to not take his $2,000 a month
social security check. Joe should
file with the social security system as if he will begin taking his checks.
Then, he should immediately suspend taking checks. This filing allows Jen to
begin taking her social security check at her full retirement age of 66 based
on Joe’s higher amount. The social security system lets a spouse take the
higher of (1) what is due to them based on their own career or (2) half of the
amount due to the spouse. So, in our example, we will assume that half of Joe’s
benefit, or $1,000, would be more than Jen’s benefit. Since Joe had originally “filed”
to take his benefit Jen can take this higher amount based on Joe’s career
record. There is an additional win with this strategy. Since Joe is delaying taking his own
benefit until he reaches 70 years old, it will be a substantially higher
amount.

Start getting comfortable with your potential
benefit. A month or so before your birthday every year, social security will
send you an estimated benefit amount for your early, full, and late retirement
dates. If you are healthy and can
afford it, you will be wise to wait until at least full retirement age to take
your benefit. And married couples will be wise to delay taking the larger
benefit. There is an 80 percent chance that one or both members of a 65
year-old couple will live to 85 years old; and a 58 percent chance that one or
both will make it to 90 years old.

There may be other strategies to consider given
your unique situation, so don’t hesitate to call on us or another investment
advisor for advice.

* Ellen Le is the founder and president of Ascend
Investment Management (www.ascendinvmgt.com). She has been a financial planner
and investment adviser for more than 20 years. Send questions to: ellen@ascendinvmgt.com and write “Chadds Ford Live” in
the subject line.

About Ellen Le

Ellen is the Founder and President of Ascend Investment Management. She was born in Philadelphia and has lived in the Delaware Valley for most of her life. When she is not researching investments and managing portfolios, she pursues her interests in tennis, bridge, hiking and art. Beginning her investment career in 1981 as a stockbroker at E.F. Hutton and Co., Ellen now has over 20 years of investment management experience. Prior to founding Ascend in 2006, she managed high net worth assets for many years at Bank of America, Mellon Bank, and most recently at Davidson Capital Management. At Davidson Capital Management, Ellen served as a Senior Vice President and Senior Portfolio Manager of the firm. She managed assets for more than 50 family relationships and was a core member of the firm’s Investment Committee.Ellen earned a BA in History from Brown University and a MBA in Finance & Investments from The George Washington University. She is a member in good standing of the Chartered Financial Analyst (CFA) Institute, which is a global organization dedicated to setting a high ethical standard for the investment profession. Her professional memberships include the Delaware County Estate Planning Council, Women Enhancing Business (WEB), and the Chadds Ford Business Association. She is a docent with the Delaware Art Museum and an active volunteer with the Brown University Alumni Association.

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