Anyone who is eligible for Social Security benefits can start collecting what the government calls "reduced benefits" as early as age 62. Reduced benefits are approximately 25% to 30% less than what you would receive if you waited to collect until your "full" retirement age.

Caution: Once you begin receiving reduced benefits, your benefits stay reduced, even after you hit full retirement age! It is an irreversible decision.

Full Benefits

"Full benefits" start when you've reached the "full" or "normal" retirement age as defined by Social Security. This age ranges from 65 to 67 years old. Why the range? It's based on the year you were born. For example, if you were born in 1937 or earlier, your "full" retirement age is 65. If you were born between 1943 and 1954, it's 66. If you were born in 1960 or later, "full" retirement kicks in at age 67. 

Let's look at an example. (These dollar amounts are approximate and are subject to change due to inflation.) Let's say you're eligible for a monthly benefit of $1,610 at age 62. If you wait until age 66, you would get $2,190/month and your monthly check would be $2,945 if you wait until age 70 to collect.

Waiting Beyond Full Retirement Age

To further complicate matters, there's an additional benefit for waiting to collect beyond "full" retirement age. By waiting, your Social Security check will increase by 8% for each additional year you wait until you hit age 70.

Note: If you were born before 1943, the rate is slightly lower than 8%.

However, waiting to collect after age 70 has no impact on the dollar amount. So once you hit 70, you might as well start getting those checks.

How To Decide

Determining the right point at which to start taking benefits depends on how much you've already saved for retirement, how much you spend each year, how much additional income you think you will earn between age 62 and your "full retirement" age, your life expectancy and your health.

I recommend that you run the numbers through one of the online calculators. I particularly like the one at: http://www.choosetosave.org/.

The Rule Of Thumb

The rule of thumb, which like all rules of thumb is far from perfect, is that the longer you think you will live, the more likely it is that delaying Social Security benefits will pay off. To take a closer look at this, run the numbers through the Social Security Administration's break-even age calculator at: www.socialsecurity.gov/planners/morecalculations.htm.

If You Plan To Keep Working

This is another reason to delay collecting. Until you reach "full" retirement age, your Social Security benefits will be reduced by $1 for every $2 in earned income over a stated annual amount. This stated amount, which increases with inflation, is $13,560 as we go to press.

This $1:$2 penalty does not apply to investment or rental income.

If You Are In Poor Health

And you think you will not live past 75 or so, you probably should start collecting benefits prior to reaching full retirement age.

 For Further Information

Choose To Save. You can get various estimates, including your Social Security benefits, at: http://www.choosetosave.org/.

Your Social Security Office will also walk you through your options. Be sure to let them know if you have a dependent child or a spouse who is entitled to benefits. Both impact on when and how much.

- Nancy Dunnan