OLDER WORKERS AND SOCIAL SECURITY BENEFITS

You’ve seen your paycheck hit every pay period with money pumped into the Social Security black hole, while hearing that the Trust Fund isn’t going to be there after the Baby Boomer tsunami. His drive is to take the money at 62 and run. But maybe you should resist that urge.

WHY OLDER WORKERS SHOULD WAIT

For every year you delay receiving Social Security benefits after age 62, your benefits increase by 5-8%. Reason enough to delay early retirement? Remember, we are talking about lifetime benefits. Hopefully it will be a long stream of income with an increase of 5% to 8%. This is especially important since you are living longer and are likely to rely primarily on your Social Security payments to survive.

Your benefits are tax free until your annual earnings plus half of your annual benefits exceed $25,000.00. If you work full-time or even part-time after age 62, you are exposing your benefits to taxes. [Think of “tax-free” as a return on investment – it would be hard to do better in the market.]

So why do just over half of retirees choose to take their benefits at age 62? Who knows for sure, but perhaps his “payoff” fatigue, coupled with pessimism, the Trust Fund will survive. I suspect illness, disability, and job loss are factors. But if you can avoid taking early withdrawal from Social Security, do so. Immediate losses from early retirement are safer than long-term speculation on the Trust Fund.

AGE DISCRIMINATION HARMS THE FLOW OF SOCIAL SECURITY BENEFITS.

One sad consequence of age discrimination is that older workers without a large retirement portfolio may be forced to retire early. Those losses can be significant. Those losses can be calculated against the older worker’s retirement plans if age discrimination had not caused an early termination of employment. More insidious is that ageism burns at both ends of the age candle. Finding a new job with comparable pay is also hampered by age discrimination in hiring.

CONCLUSION

Get good financial advice to assess the role of social security payments as part of your total retirement payments. And, if you’re fired because of your age, when younger workers without greater talent, work ethic, or reliability replace you (or avoid firing selection), then consider legal advice, too. This legal analysis must include in your loss calculation the stream of tax-free social security benefits that are reduced by early retirement and included in taxable income due to the need to continue working at a lower-paying job.