OLDER WORKERS AND SOCIAL SECURITY BENEFITS
You’ve seen your paycheck whacked every pay period with money pumped into the black hole of Social Security, while hearing that the Trust Fund isn’t going to be there after the tsunami of Baby Boomers. Your impulse is to take the money at age 62 and run. But maybe you should resist that impulse.
WHY OLDER WORKERS SHOULD WAIT
For every year you delay taking Social Security benefits past age 62, your benefits increase 5%-8%. Reason enough wouldn’t you say to delay early retirement? Remember, we’re talking benefits for life. That hopefully is a long stream of income at 5% to 8% increase. This is especially important as you live longer and likely rely primarily on your social security payments to survive.
Your benefits are tax-free until your annual earnings plus ½ your annual benefits exceed $25,000.00. If you’re working full time or even part time past age 62, you’re exposing your benefits to taxation. [Think of “tax-free” as a return on investment – it would be hard to do better in the market.]
So why do slightly more than ½ of retirees elect to take their benefits at 62? Who knows for sure, but maybe its “pay-in” fatigue coupled with pessimism the Trust Fund will survive. I suspect illness, disability, and job loss are factors. But if you can avoid early social security withdrawal, do so. The immediate losses of early retirement are more certain than the longer-term speculation about the Trust Fund.
AGE DISCRIMINATION INFLICTS DAMAGE TO THE SOCIAL SECURITY BENEFIT STREAM.
One sad consequence of age discrimination is that older workers without a large retirement portfolio may be forced into early retirement. Those losses can be significant. Those losses can be calculated against the older worker’s retirement plans had the age discrimination not caused an early employment termination. More insidious is that age discrimination burns at both ends of the age candle. Finding new work at comparable pay is also impeded by age discrimination in hiring.
Get good financial advice to assess the role of the social security payments as part of your total retirement pay-outs. And, if you’re laid off because of age, when younger workers with no greater talent, work ethic, or reliability replace you (or avoid layoff selection) then consider legal advice as well. This legal analysis should include in the calculation of your losses the stream of tax free social security benefits that are reduced by early retirement and are included in taxable income because of the need to continue working at a lower paying job.