Retirement

The answer in most people's minds is as soon as possible and when you can afford it. Sounds simple but there are certainly reasons for some serious thought over the whole question.

It's election year in the USA in case you haven't noticed. While there will be a new President in place early next year once the two major parties select their nominees and the vote takes place, it does not mean that the new President is all-powerful. The make-up of Congress, Senate and House of Representatives, is important because currently there is a Republican majority in Congress working with a Democrat President. The smart money suggest that things won't change but that is potentially bad news for those that are looking to rely on the Social Security System in retirement.

Social Security

Current estimates suggest that by the mid-1930s the funds will not be available to maintain the current level of benefits. The solution of extra taxes does not sit well with the powerful Republican Party. Unless there is a distinct change of heart, those people making little provision for retirement will find life increasingly difficult once they no longer have a regular monthly pay check coming in.

Currently people can start to draw benefits as early as the age of 62 even though normal retirement is a few years on. The difference between what someone can collect at 62 is considerably different from what they can get if they defer to the final possible date, attaining the age of 70.

The difference between taking money at 62 and 66 is quite considerable. Deferring until 66 or 67 is around 30%, with a 5% reduction a year on etc. Anyone waiting until 70 can expect an additional 20% than those claiming at 66 or 67. It does mean that there are some distinctly important decisions that those in late middle age have to make.

In actual monetary terms, if you decide to wait until you are 70 to claim benefits you will have foregone 96 monthly checks. You may actually have received a similar gross figure at the end of the day if you don't reach 80 but whether that means take money at the first possible opportunity is questionable.

The most recent figures suggest that the average check at 67 is just over $1500 a month, $18,000 a year. If you wait for 3 further years you will not have collected $54,000 if you start at 70. The average check at 70 is $1860 so it will be another 12/13 years before you retrieve that $54,000 so break even age is 82 or 83. That's a bit of a gamble.

Life Expectancy

No one can predict the future, especially their life expectancy so the decision you make on retirement will be subjective and instinctive. When it comes to retirement most people would want to do that early in order to spend as many years as possible doing things they have always wanted to do be it travel, have more time for their hobbies or take up a new one. The problem is the need to balance the desire with the ability, and that means having the funds to retire.

It is all the more reason to make proper financial plans. If you make proper plans you can reach a situation whereby the Social Security money merely supplements what you have accumulated over the years. If you can build up a significant fund there is far less pressure on your decision about when to begin taking benefits.