Question: Help! I’m 62 and my income is declining. Should I take social security now to lock in my benefits?
Quick answer: this is not a good reason to take social security early.
Social security uses your highest 35 years in calculating your benefit. They index the years before age 60 for inflation, and then average them. So while lower earnings in the last few years before you take social security don’t help increase your “high 35” average, it doesn’t reduce it either. Bottom line: lower earnings now is not a reason to start taking social security earlier.
One thing to be aware of: it may appear on your social security statement that your future projected benefit at full retirement age is declining if your earnings are going down. That’s because each year when your statement is generated, social security projects that your income will stay the same as last year’s income all the way through retirement. If that doesn’t happen, they need to adjust the projections.
You should really base the decision on when to take social security on whether you need the money now or not, and how life expectancies run in your family. If people tend to live a long time in your family, waiting is likely a very good idea if you can afford to live without the income now.
Of course, social security is under-funded, and there are no guarantees for any of us. But those in the 60+ age group can have more certainty in planning on full or close to full benefits than people under 50.
If you want to read more about this, you can walk through your calculation at http://www.socialsecurity.gov/pubs/10070.html#estimate.