As baby boomers approach retirement age, many will face a tough, but critical financial decision: When to take Social Security benefits.
For the oldest of baby boomers turning 60 this year, the full retirement age for benefits is 66.
They can opt to start benefits earlier, beginning at age 62. The trade-off is that monthly benefit checks will be lower for life because they are collecting them for more years.
Or, they can delay benefits up to age 70 and get the largest possible monthly benefit.
On average, it's not supposed to matter. Retirees on average receive similar lifetime benefits whether they start taking them early, at full retirement age or at 70. But who's average?
Live longer than average, say into your late 80s or 90s, and you would have been better off delaying benefits. Going splat while skydiving at 64, you would have done better to have started the checks at 62.
"It's a huge gamble for everybody," said Clare Hushbeck, an AARP economist.
Once you start drawing benefits, it's hard to reverse course. You can withdraw your application for early benefits if you change your mind, but you will have to repay any money received so far, said Dorothy Clark, a Social Security Administration spokeswoman.
So as older boomers approach retirement, they need to consider a variety of factors on when best to take Social Security to maximize their lifetime benefits. The main factor - and the most difficult to know - is how long they will live.
"It's a game of life expectancy," said Mauricio Soto, a senior research associate with the Center for Retirement Research at Boston College.
The case for taking benefits early: If your family's health history indicates your retirement is likely to be a short one, then it may be wise to grab benefits while you can.
Some workers don't have a choice because of finances. The only way to make ends meet if they retire at 62 is to take their benefits then.
But sometimes it makes sense to take benefits as early as possible if you don't need them, said Sam Beardsley, director of investment taxes at T. Rowe Price Associates in Baltimore.
By investing early benefits instead of spending them, people under most scenarios can end up with more benefits over their lifetimes than if they delayed taking benefits until their normal retirement age or even at 70, he said.
