Rich Galen

Yesterday, December 21, 2008, I turned 62, making me eligible for Social Security. This does not fill me with the joy of this or any other season.

To save you the task of doing this on a piece of paper, I was born in 1946. The old man hopped off the boat at the end of World War II and just about nine months later I hopped out of mom which makes me the leading edge of the "Baby Boomer" generation.

The question we baby boomers ask each other while sitting around the shuffleboard court waiting for the argument to end as to whether the puck is actually touching the 10-Off line or not is: When should we start collecting Social Security?

Notwithstanding Bernard Madoff's $50 billion Ponzi scheme, Social Security is the Ponziest of schemes so there is some temptation to start taking it today (or, in my case yesterday) while there is something left to get.

A web page constructed by the Social Security Administration points out that if you choose to collect your Social Security bennies at 62 you will receive only 75% of your allowable benefit per month. Forever.

It doesn't go up when you hit the other benchmark ages. Sixty Six is the "full retirement age" for those born between 1943 and 1954. Here is what the chart shows:

62 years old - 75% of your benefit.
66 years old - 100%
67 years old - 108%
70 years old - 132%

So, you might be saying to yourself, "I'll just hang on until I'm 70 then I'll start collecting and I'll be able to afford the penthouse at Del Boca Vista.

Not so fast, there, gramps. According to the Social Security web page:

As a general rule, early or late retirement will give you about the same total Social Security benefits over your lifetime.

If you retire early, the monthly benefit amounts will be smaller to take into account the longer period you will receive them.

If you retire late, you will get benefits for a shorter period of time but the monthly amounts will be larger to make up for the months when you did not receive anything.

I went to the page that lets you estimate your benefits if you stop working today and the numbers are as follows (for me):

Age 62 - Monthly benefit would be $1,618 ($19, 416 per year)

Age 66 - Monthly = $2,271 ($27,252 per year)

Age 70 - Monthly = $3,133 ($37,596 per year)

According to an article on the MSNBC website, "The average life expectancy in the U.S. in 2003 was 74.8 years for men and 80.1 for women."

Let's assume - and this makes me laugh - that I am average and I will live until about the end of November 2020 when I will be 74.8 years old.

Let's go to the whiteboard.

If I retire this week and collect 62-year-old benefit, I will have collected about $248,524.80 by the time I die. ($19,416/year for 12.8 years)

At 66 the total will be $239,905.60 ($27,252/year for 8.8 years).

Waiting until I am 70 and I will rake in only $180,460.80 ($37,596/year for 4.8 years).

Well, this is easy! I'll just hop on down to the Social Security office this afternoon and fill out the papers.

Dear Mr. Mullings:

Do you really think the U.S. Government is going to hand you 20 grand a year just for being you?

Signed,
The American Society of Actuarial Humorists

Yes. Why. Isn't that what this is all about?

$1,618 per month doesn't cover your Starbucks bill.

Well, I'll keep working, of course.

We have two words for you: Earnings Cap.

Ah. It seems that if you are collecting Social Security between the ages of 62 and 66 you have to give back fifty cents of every benefit dollar you earn over about $13,000 per year. So, if you make anything over about $55,000 per year your Social Security benefit drops to zero.

Plus, you have to pay Social Security taxes on the money you make so you are actually in the hole by starting your benefit at 62 and continuing to work at a job that pays more than about a grand a month.

I don't actually intend to retire because of two things:

(1) I don't actually have a job to retire from; and,

(2) my 401k is a good news bad news joke.

The good news is that it is (and has always been) totally in cash so there has been no decrease in its value because of the stock market. The bad news is that its value is about a dollar thirty-seven.

I have to go. Today is a work day.


Rich Galen

Rich Galen has been a press secretary to Dan Quayle and Newt Gingrich. Rich Galen currently works as a journalist and writes at Mullings.com.