The retiree: age 68, plans to retire at 70, earning $135K with a pension and $800K in an IRA, and little debt. The question: Take Social Security now, or wait? Here's our columnist's answer...
I am 68, work full-time for the federal government, and plan to retire at age 70. I earn $135,000 a year, but have about 18 months to go to hit my five-year employment anniversary which will get me a $12,000 a year pension and continued health care coverage for life. I also have about $800,000 in an IRA, pay off everything monthly, and my credit score is excellent. The only real debt I have is a $48,000 home equity line, which I have been paying down by $2,000 a month.
“Assuming she is single and her pension is from a job covered by Social Security taxes, then the decision revolves around her life expectancy. Since her full retirement age [that’s the age you first become entitled to full retirement benefits] is 66, the break-even age [that’s the age when you come out ahead financially by delaying taking Social Security benefits] between starting benefits at 68 or 70 is 84.
Of course, you also have HELOC debt, so that’s a factor here, too. But as Mitchell C. Hockenbury, a certified financial planner at 1440 Financial Partners in Kansas City points out, it’s not likely that paying it off by taking early benefits is worth it to you. There are two other things that should encourage you to delay taking benefits, Meyers points out: “First, suppose her life expectancy is about 84.5. The risk of running out of money in her lifetime is highest if she lives longer than expected. This would encourage delaying her benefits until 70,” he explains.
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