Q. My neighbors and I are wondering. Should we begin drawing Social Security retirement benefits at 62 or wait until 66? We've heard that it is better to start at 62 because the difference in monthly payments is not significant and it would take up to 10 years after 66 to make up for the money you'd get from 62 to 66. ;Another advantage to drawing at 62 is having the money to enjoy life while your health is better. What do you think? —P.L., Kernersville, NC

A. If you can, it is better to delay taking benefits, particularly for a married man with a somewhat younger wife who earns less than he does. This is typical of most marriages. One reason is that the increase in benefits is significant. According to the Social Security website (http://www.ssa.gov/retire2/agereduction.htm ), for instance, if you were born between 1943 and 1954 your full retirement age is 66. Taking your benefit at age 62 would result in a 25 percent reduction in your benefit. Someone who would receive a $1,200 a month benefit at 66 would receive only $900 at 62.

While it would take 12 years to recover the benefits lost between age 62 and age 66, the life expectancy of all 66 year olds in America is 17.8 years, so you’ve got a good chance of making out very well on the deal.

Married couples have a better chance since their joint life expectancy is even longer and the surviving spouse will get the deceased spouse’s benefit. This is a good reason, in most marriages, for men to defer taking benefits until age 66 or later while their spouses take benefits early unless they are still working.

Meanwhile, taking the benefit and saving it may increase your income taxes (so you’ll save less than the benefit). It would require a very high return on the invested benefits to provide the increase in income you would enjoy through simple deferral.

In the example above, for instance, even if you felt safe withdrawing at a rate of 4 percent, you’d need to have $90,000 invested to have reasonable assuring of being able to have $300 a month in inflation adjusted spending. Yet the amount of benefits you are deferring ($900 a month times 48 months) is only $43,200. (This calculation ignores the possibility that you might want to leave money to heirs.)

The “take the money while I’m still healthy” question is more difficult. But most people are still alive and relatively healthy at 66. Whether you are one of those people is for you to answer.


Q. I am retired and receive Social Security benefits of $1,300 a month. I also have a company pension of $1,000 a month and work part-time. ;I pay taxes on the company retirement and the part-time job. ; However, paying taxes on Social Security benefits seems like double taxation. ; I have given up the part-time job, but my accountant said that since my wife still works the government will keep taxing my Social Security. ; I don't recall my father paying taxes on his Social Security benefits. ; What happened? ; —M.J., from Austin, TX

A. The 1983 Social Security reforms recommended by the Greenspan Commission initiated the taxation of Social Security benefits. They set income thresholds for the taxation of Social Security benefits. Until then all Social Security income was tax-free. If your income including Social Security exceeds certain amounts a portion of your benefits (up to 85 percent ) will be included in your taxable income.

These threshold amounts— $25,000 for a single return, $34,000 for a joint return— are not indexed to inflation. So more people are affected every year. About 30 percent of Social Security recipients now pay taxes on some portion of their benefits. You can learn more at: http://www.ssa.gov/planners/taxes.htm

This tax bomb was planted by Republicans under Ronald Reagan. It was later expanded by Democrats under Bill Clinton. Similar un-indexed provisions exist in the recent overhaul of healthcare. This is how modern politicians have gone beyond the “taxation without representation” of King George to create what one wag has called “taxation without cognition.”