ERWIN FREED confronted the dilemma last year that many face as they near retirement: when to begin drawing Social Security benefits.
Do you take benefits as early as possible, age 62, but receive a smaller monthly check for life? Or, do you wait until full retirement age, which is gradually rising from 65 to 67, and get a bigger check? You can collect an even larger monthly benefit by waiting until age 70.
Freed's decision to start collecting benefits at age 62 meant he receives $379 a month less than if he had waited until he was 65 1/2 .
"I tossed it back and forth," said the retired aircraft mechanic, who lives in Ellicott City. "I read the pros and cons on taking your Social Security early or leaving it be."
It's a mathematical decision, but not always an easy one.
Basically, Social Security benefits are designed so that if you begin taking them early, at full retirement age or at 70, you will receive a similar amount over your expected lifetime. But that's only if you're average.
"Most people aren't average," said Joel Bruckenstein, a financial planner in Miramar, Fla. "Some people have a history of longevity in their family. And some people know they have serious health problems."
Life expectancy is a major factor in figuring when to take Social Security if the goal is to maximize benefits.
Those in poor health and likely not to live long are better off taking benefits early. Those blessed with hardier constitutions should postpone benefits to at least their full retirement age, experts said
Another major consideration is finances. You might have no choice but to take benefits early if you don't have enough other income to meet living expenses and avoid going into debt, the experts said.
There's also a disincentive to taking early benefits if you plan on continuing to work. Social Security will withhold $1 of benefits for every $2 of earnings over $11,520 until you reach full retirement age. Once you reach normal retirement age, the agency will adjust benefits upward to reflect those withheld because of excess earnings.
Freed weighed some of those issues before deciding to take the smaller benefit.
Social Security combined with pensions from two airlines would provide enough income to meet living expenses for himself and his wife, Carolyn.
In addition, he would be able to leave his investments alone to continue growing, possibly building into an inheritance for his two sons and grandchild.
He figured he would have to live to about 80 to make taking benefits at his full retirement age financially worthwhile.
"I don't have longevity in my family," he said, adding that his mother died at age 65, his father at 72.
"Any time I live after age 72 is a gift," said Freed, who turns 63 next month.
To help with planning, the Social Security Administration offers online calculators at www. ssa.gov that show the impact of taking benefits at various ages.
For instance, a 61-year-old earning $55,000 a year would receive a monthly benefit of $1,036 at age 62, $1,430 at the full retirement age of 65 years and 10 months, and $2,000 at age 70.
By electing to begin benefits at age 62 rather than full retirement age, the retiree would remain financially ahead for more than a decade because he would collect more checks for more years. The break-even point, at which the total received is the same whether benefits are taken early or later, is at age 75 and 10 months.
From that point on, the retiree who delayed benefits would end up receiving more money.
And there's a good chance that retiree would live long enough to see those extra dollars. The life expectancy for a 61-year-old today is 79 for a man and about 83 for a woman, according to Social Security.
Most people start drawing benefits at 62. Some didn't save enough for retirement and need the money to make ends meet, financial experts said. Others fear that Social Security might be imperiled and want to grab benefits while they can, experts said.
"People like getting money now, the bird-in-the-hand kind of thing, which is where they go astray," said William Jennings, an associate professor of finance at the Air Force Academy in Colorado Springs, Colo.
That so many take benefits early makes retirement specialists worry that people are not looking at the long term.
Many people underestimate their life expectancy. And larger monthly benefits later in life are likely to come in handy to meet growing medical costs, experts said.
Elaine Floyd, a financial planner in Bellingham, Wash., suggested that people plan their finances on the assumption that they will live to 90 or 95.
Floyd, 57, plans to take her benefits at age 70. If she took early benefits, her monthly check would be $1,293. By waiting eight years, her monthly benefit would be $2,544. "I've got old relatives," she said. "They lived into their 90s. That's what I see for myself."
Jennings suggested that delaying benefits should be viewed as sort of "longevity insurance" in the event that your portfolio doesn't last as long as you do. "You can't outlive Social Security," Jennings said. "You can outlive your portfolio."
Jim Thompson, a financial planner in Boston, said he encourages clients not only not to take benefits early, but also not to retire early.
"Work has so many other benefits, financial as well as psychological," he said. "I tend to think early retirement is a lifestyle mistake for many people."
To suggest a topic, contact Eileen Ambrose at 410-332-6984 or by e-mail at eileen.ambrose @baltsun.com.