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Social Security and You: Take My Social Security Advice ... Not My Financial Advice

Tom Margenau on

Take My Social Security Advice ... Not My Financial Advice

I've discussed this issue before in this column. I am a Social Security expert. But I am NOT a financial planner. I give people all the facts, and then let them decide, sometimes in consultation with a real financial planner, exactly when they should start their Social Security checks.

To put it another way, I don't worry about money. I certainly don't obsess over it as so many senior citizens seem to do today. Don't get me wrong. Money is great. And having more of it is certainly better than not having enough of it. My wife and I are financially comfortable. But we are not close to being classified as rich, or even well-off. And we are totally fine with that.

I was reminded of my lack of concern over money matters when many readers reacted almost in shock to something I said in a column a couple weeks ago. A guy had written telling me he was worried that he wouldn't get the full 32 percent bonus for delaying his Social Security benefits until age 70. This guy was turning 70 in September, and he wanted to make sure that his benefits didn't start before then. I told him to just make sure that he indicated September as the starting month when he filled out his Social Security retirement benefit application.

But then I opened the floodgates of criticism when I told him not to worry. I said if his benefits would happen to start one month early, he'd only lose a fraction of one percent in his ongoing benefit rate. So I said it was "no big deal." And I thought my comment was literally that -- no big deal. But here is an example of the reaction I got:

"I can't believe the lousy financial advice you gave a reader this week! You told him it would be 'no big deal' if he got one month's extra Social Security check at a reduced rate. You're wrong. It would be a HUGE deal. You've got to remember that the loss he suffers will just continue to compound over the years. He could eventually lose hundreds if not thousands of dollars if he takes the reduced benefit rate."

So let me make a couple points in response to that criticism, and the many others I received in a similar vein.

First, I was NOT giving this guy financial advice. I merely told him that I thought it wasn't that big a deal if he ended up making a mistake and starting his benefits in August instead of September.

Second, let's follow an example to find out if it would be "a HUGE deal" if that happened. Let's say the guy's full retirement age benefit is $2,000 per month. If he waits until age 70 in September to start his retirement checks, he'd get the full 32 percent bonus. In other words, he'd get $2,640 monthly.

The delayed retirement bonus is actually two-thirds of 1 percent for each month benefits are delayed beyond age 66. That comes out to 32 percent at age 70. So if this guy inadvertently started his Social Security checks in August, he'd get a roughly 31.4 percent bonus instead of the full 32 percent. In other words, his monthly Social Security check would be about $2,628.

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