In 2010, the first baby boomers became 64 years old. Millions more will reach this age in the next few years. Therefore, many financial planning clients are asking  “When should I start my Social Security benefits?”

One can begin to receive Social Security benefits as early as age 62.  Before your full retirement age (FRA), you will receive reduced benefits for the rest of your life.  If your full retirement age is 66, as it is for people born from 1943 to 1954 (age 59 to 70 this year), by starting your Social Security benefits at 62, you will receive 75% of your FRA benefit.

Here is an example:

Mike Boyd has a work history that entitles him to $3,000 a month from Social Security at 66, his FRA.  Instead Mike starts his benefits at age 62.  Mike will only get $2,250 (75% of $3,000) for the rest of his life, plus any cost of living adjustments (COLAs).

Here is an example if Mike decides to wait:

If Mike decides to wait until age 66, his FRA, he will get his basic $3,000 a month for the rest of his life, plus COLAs.  Thus, by waiting 4 years, Mike increases his monthly benefit by $750 – a 33.3% increase from the first example, which is about 8% a year for the 4 years he waited.

We recognize that it isn’t simple, and that things come up in life.  A question that one might ask him/herself is: Do I need the money?  If Social Security benefits are necessary to maintain your lifestyle in retirement, you should probably consider taking them.  Another question is regarding health.  The shorter your life expectancy is, the more likely you and your loved ones will be well served by taking the benefits while you can.