A bewildering number of articles have been written – many of them here on the AgingOptions blog – about the best strategy for maximizing Social Security. In spite of all the times this topic has been examined, Social Security inquiries rank near the top of questions we get on our radio program and at our LifePlanning Seminars. That’s why we’re always on the lookout for articles that offer some fresh insight into this perplexing question, articles such as the two we recently discovered on the popular financial website Motley Fool.

The first question most people ask about Social Security is “When should I start taking benefits?” For most people born between the mid-1940’s and 1954, the earliest age to draw benefits is 62 – and once people reach that age, it’s tempting to pick the low-hanging fruit and start augmenting your income. Roughly 45 percent of people do just that, compared with about 30 percent who wait until full retirement age at 66. As we said, it’s tempting to start benefits early – but it’s a bad idea.

The first of these articles from Motley Fool explains two big reasons why taking those payments at 62 simply doesn’t pencil. It’s called Just How Big a Social Security Hit Do Early Retirees Take?  “Getting the most you can from Social Security is an important part of ensuring your financial security after you retire,” writes author Dan Caplinger. He adds that, while early retirement may be a desirable goal, leaving the workplace early “can create financial challenges that you need to address before you pull the plug on your career once and for all.” The important thing here is not to get caught by surprise. “By working through the numbers and applying the program’s rules to your particular situation,” says Caplinger, “you can plan accordingly and make sure that you’ve made other arrangements to make up for any reduction in the monthly payments you were expecting from Social Security.”

We’ve heard lots of reasons why beginning your benefits at 62 causes problems down the road, but here are the “Big Two,” according to “the Fool.”

• Smaller Payments for Life. This is the biggest drawback, and it’s one many retirees still don’t understand. “The clearest hit that early retirees from Social Security suffer is the mandated reduction in the size of the monthly benefits they receive,” says Motley Fool. The article explains some of the math, but the bottom line for the average retiree is that a benefit of $1,000 at age 66 would only be $750 at age 62 – an annual penalty of $3,000, locked in for the rest of your life. By contrast, waiting until age 70 – something only 4 percent of retirees do – would boost that same $1,000 payment to well over $1,300. (Something this particular Motley Fool article doesn’t mention is that those drawing benefits at age 62 and still working full time may have their benefits reduced depending on how much income they’re earning. This can come as an unwelcome shock to retirees on a tight budget.)
• A Shorter Work History. This is a hidden problem that can further reduce your benefits. Social Security calculates benefits based on your 35 highest-earning years. Since most workers are earning more late in their work-life than they did early on, you’ll be replacing those potentially higher-paycheck years with the meager amount of money you made when you were younger. “So in very rough terms,” says Caplinger, “each year that you retire early and miss out on a year of earnings history can reduce your average earnings by about 3 percent. For those who have peak earnings at the end of their career, the impact on average earnings can be even larger.”

The second Motley Fool article is this one answering a question we hear often: once you’ve started benefits early, can you change your mind? “Oops,” the article is titled – “You Claimed Your Social Security Benefits Too Early. What Now?”  According to the article, the short answer is, “You can undo an early Social Security benefits claim — but it will cost you!”  The sad truth, as this second article points out, is that about forty percent of Americans believe the reduced benefit they receive by claiming at age 62 will be magically raised to full benefits at age 66, an assumption that is completely false. “Whether you claimed early because you didn’t understand how the reduction in benefits would work or you simply changed your mind,” writes Motley Fool, “you do have a few options if you aren’t happy with the decision you made.”

Here are your three primary choices if you want to undo your early-benefits decision. Note that only the first one is truly a do-over – the other two are designed to reduce some of the pain.

• You can withdraw the benefits claim if within 12 months or less. You need to submit a written request and pay back all the benefits you’ve received. Once you’ve done this, it will be as if you never claimed benefits at all, says the Motley Fool
• Reducing the benefits you’re receiving by earning work credits if you’ve not yet reached full retirement age. This gets confusing, but Motley Fool puts it this way: “If you haven’t yet reached your full retirement age and you work while receiving Social Security, your benefits will be reduced by $1 for every $2 earned above $17,040 per year. You’ll get credit later for this reduction, which means you’ll get back some of the benefits that you lost by claiming Social Security early.” In other words, keep working, accept the benefit reduction now, and get some of those deferred dollars back in the future.
• Suspending your benefits if you’re past your full retirement age. If you’re between age 66 and 70, the article says you have the option to voluntarily suspend your benefits. This allows you to earn delayed work credits, which in turn yields higher benefits in the future when payments resume.  Remember, for most retirees under current rules, suspending your benefits also suspends your spouse’s benefits if he/she is claiming them on your work record.  The old “file and suspend” rule that would allow your spouse’s benefits to continue is gone.

Navigating the choices you’ll have to make in retirement demands a qualified guide, and that’s what we at AgingOptions can offer you. Thanks to our uniquely comprehensive LifePlanning strategy, every aspect of your retirement meshes seamlessly with the others, like a well-designed machine. This includes financial plans, housing choices, medical protection, a solid legal foundation, even communication with your family. Don’t try to go it alone! Instead, take a simple first step and join Rajiv Nagaich at an upcoming LifePlanning Seminar. Remember, there’s no cost – just the chance to gain invaluable information that will help guide you into the retirement future of your dreams. You’ll find all the schedule details here – then register online or call AgingOptions for assistance. We’ll see you soon at an AgingOptions LifePlanning Seminar.

(originally reported at www.fool.com)