When Should You Take Social Security Benefits?

If you’re nearing retirement, it may be time to consider whether you should take social security benefits early, on time, or late.

To make such a decision, it’s important to know how Social Security works.

Full benefits are available as early as age 65, depending on your date of birth.

You may receive benefits at age 62, but your benefits will be reduced.

Or you can delay benefits until age 70, in which case your benefits will increase.

When choosing which option is best for you, there are many factors to consider.

Two major factors are your life expectancy and whether you actually need the benefit to support your living expenses.

To understand why, remember that Social Security calculates monthly payments so that if you start early, the smaller payments received over a longer time could total the same amount as if you had started receiving benefits at normal retirement age.

On the other hand, if you start late, the bigger payments received over a shorter time could total the same amount as if you had started receiving benefits at normal retirement age.

However, all these calculations are based on your normal life expectancy.

If you live beyond that life expectancy, then delaying benefits will result in higher monthly payments and a potentially higher lifetime total.

If you don’t expect to reach or exceed your life expectancy, then it may make sense to start as soon as allowed.

There are many other factors to consider in deciding when to take Social Security benefits.

Before you make a decision, it’s wise to seek advice from a professional.

Social Security offices across the country have staff available to talk to free of charge.

Call the Social Security Administration at (800) 772-1213 for the location of an office near you.

Are Roth IRAs for You?

More people have access to the Roth individual retirement account (IRA) as a result of changing tax rules. The question, then, is: Could you benefit?

A Roth IRA differs from a Traditional IRA in regard to taxation. With a traditional IRA, contributions are tax deductible, but you pay taxes on withdrawals. With a Roth IRA, you don’t get a deduction when you contribute, but you won’t pay taxes on withdrawals, which include earnings that have accumulated over the years. That makes the Roth IRA attractive.

In the past, however, many investors couldn’t participate because their income was too high. But on Jan. 1, 2010, the rules for Roth IRAs changed. Now there is no income limit for individuals who want to convert traditional IRAs and employer-sponsored retirement plans to Roth IRAs. Although the converted amounts are subject to income tax, future withdrawals that meet certain holding requirements will be tax free.

So how do you determine if you should convert a traditional IRA to a Roth IRA? As a general guide, you may want to consider the past and anticipated future performance you expect from your investments. If you have an investment that you consider depressed in value, with appreciation potential, it may make sense to convert it to a Roth – because that way you won’t have to pay taxes on any potential increase in value.

On the other hand, you may not want to convert an investment you think is at or near an all-time high, such as a stock you bought for $25 per share that has climbed to $200 per share.