I read that it is better to wait until age 70 to apply for retirement benefits. Is that true?

It depends. Have you ever tried on a robe or a pair of gloves marked one size fits all and been disappointed that they were either too big or too small on you? That's how I feel when I hear about articles advising people to either (1) apply at 62, invest the money, and pay all their benefits back at age 70 or (2) wait until age 70 to apply for retirement benefits as if this would be the best choice for everyone!

My advice? Before you decide when to apply, do your research and get the facts about your benefit options.

Start with your Social Security Statement. Look at your estimated benefit rates at age 62, at your Full Retirement Age (FRA), and at age 70. You will see that the longer you wait to start your benefits the higher your monthly income. The trade off is that you will receive fewer monthly checks over your lifetime. So which is best for you?

Look at the chart below for an example of a boomer whose FRA benefit at age 66 is $1000. If he or she applies at 62, the monthly benefit is reduced by 25% to $750/month. By waiting until age 70 to apply, our boomer can receive a higher benefit of $1320/month.

By comparing total benefits paid at different ages under each option, we see that the initial advantage of choosing benefits at age 62 in this example is gradually lost sometime before age 80. After age 80, starting at age 70 becomes the most advantageous due to the higher monthly rate. It also guarantees a higher monthly income in later years when other financial assets may have been depleted.

Does this mean that everyone should wait until age 70 to apply? Not at all! There are plenty of other things to consider:

• How is your health?
• Do you plan to keep working past age 62 or have other income to maintain your standard of living until age 70?
• How will Social Security benefits affect your tax liability?
• Are you married, divorced, or widowed and potentially eligible for benefits on a current or former spouse's Social Security record?

Before you commit yourself to a course of action, make sure you have all the facts that apply to your unique financial and family circumstances. Finally, consider consulting with an expert on Social Security to help you find the benefit option that fits you "like a glove."

Social Security Fact or Myth?

"I worked under Social Security for 20 years. Now I work for a school district that only pays Medicare taxes for employees. I heard that I won't get any Social Security when I retire because I will get a government pension!"

What do you think? Social Security Fact or Myth?

Social Security Fact or Myth? The Answer

"I worked under Social Security for 20 years. Now I work for a school district that only pays Medicare taxes for employees. I heard that I won't get any Social Security when I retire because I will get a government pension!"

Answer: This is a myth.

Anyone who has earned 40 credits (roughly 10 years of work) under Social Security will be eligible for a retirement benefit as early as age 62.

It is true that the amount of their Social Security retirement benefit will be reduced if they receive a government pension based on work that was not covered by Social Security (i.e. no Social Security tax was withheld). This is because there is a different benefit formula called the Windfall Elimination Provision (WEP) used in these cases.

There are exemptions that can minimize the adverse effect of this WEP computation on government employees:

1. If you have at least 30 years of substantial earnings under Social Security (public or private employment), you will be completely exempt from WEP.
2. If you have between 21 and 29 years of substantial earnings under Social Security, your benefit rate will be increased for each year over 20 that qualifies as "substantial earnings" as defined by Social Security (see WEP Factsheet).
3. Even if you have 20 years or less of substantial earnings, any additional work you have that is covered under Social Security will increase your benefit.

My wife and I each get benefits based on our own work, but mine are higher. If I die first, will she get a higher benefit as a widow?

If your wife survives you, she will receive an increase in her benefits based on her age at the time of your death. If she has already reached her Full Retirement Age (FRA), her total benefit will usually be raised to equal the amount you receive.

If she is still under her FRA, her benefit will be reduced based on her age. In that case, she could continue to receive her own retirement and wait until she reaches her FRA to apply for the highest possible widow's benefits.

If I plan to work until I am 66, do I need to sign up for Medicare at 65?

If you are not planning to apply for Social Security benefits until you stop work, you are not required to sign up for Medicare at 65, but you still may want to do so even if you have insurance through your employer.

There are now 4 parts to Medicare and each has different rules for enrollment so let me take them one at a time.

Part A Hospital Insurance: This covers only inpatient care charged by a hospital. There is no premium charged when you enroll since the cost is covered by a 1.45% employee payroll deduction (matched by employers). You can enroll in Part A even if you are covered by an employer group health plan (EGHP) and doing so may save you money. Check with your insurance counselor to see if this would be advantageous to you.

Part B Medical Insurance: If you have medical insurance through your employer (or through your spouse's current employer), you can wait until you stop work to apply for Part B of Medicare without penalty. Since there is a monthly premium for Part B many people wait to sign up during a special enrollment period that begins with the monthy they stop work or if covered under a spouse's EGHP when their spouse stops work. Be sure to check with Social Security before you apply to find out what you will need to document your EGHP coverage.

Part C Medicare Advantage: These are private Medicare approved HMO plans available in limited geographic areas as alternatives to traditional Medicare. You must have both Part A and B to enroll in these plans and there may be additional premiums depending on the level of coverage you choose. Call 1-800-MEDICARE or go to http://www.medicare.gov/ for more information about these plans.

Part D Prescription Drug Coverage: If you have prescription drug coverage through your employer, you probably should not consider Part D. Check with your insurance counselor to be sure. If you have no prescription coverage and you have either Part A or Part B of Medicare, you can find out about Part D plans available in your area at http://www.medicare.gov/.

Can't afford the cost of Medicare or prescription drug coverage? There is help available for certain low income Medicare beneficiaries. Check with Social Security to find out how to apply.