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When to collect Social Security: Not a one-size-fits-all solution

What’s your magic number for retirement age? According to Smart Asset, the average retirement age in Hawaii last year was 64, just a year older than the national average.

The Social Security Administration’s magic number — the age when beneficiaries are can collect full retirement benefits, generally 66 or 67, depending on birth year.

While retirees can start collecting benefits as early as 62, those monthly checks will be permanently reduced — 25 to 30 percent less per month than if you start collecting at full retirement age.

If you delay collecting benefits, you’ll receive an 8 percent increase every year until age 70. If your full retirement age is 66, and you start receiving benefits at 70, you’ll collect 32 percent more in benefits every month.

So, what’s a retiree to do? Consider these factors:

Do you need the money now?

Seventy-two percent of Americans receive their Social Security benefits early. Layoffs, health issues, family obligations or other circumstances force people to retire earlier than anticipated, and their retirement fund may not be sufficient. That’s where Social Security comes in.

If you have enough income from other sources such as pensions or retirement plans, it’s best to wait until you reach your full retirement age to collect benefits.

What’s your life expectancy?

Most people don’t want to consider whether they’ll outlive the average life span, but it’s an important factor in deciding when to start collecting benefits. Social Security is designed so that those with an average life expectancy will receive roughly the same amount in lifetime benefits, whether they choose to start receiving benefits earlier or later. However, those with longer lifespans will receive more money over their lifetime if they wait to claim until age 70.

If your relatives all lived into their 90s and you’re in great health, delaying your benefits may pay off in the long run. If you have medical conditions that could shorten your life, taking your benefits sooner makes more sense.

Do you have income sources?

Sometimes, retirement happens in stages. Many people retire from day jobs but take on part-time work or consulting gigs.

If you’re claiming benefits while earning an income between $25,000 and $34,000, you may have to pay federal income taxes on up to 50 percent of your Social Security benefits. If you make more than $34,000, up to 85 percent of benefits may be taxable.

Remember that all taxable income, including wages, self-employment, interest and dividends, counts toward this number. If you’re earning substantial income, it’s best to delay your benefits.

Work with your financial advisor to determine your magic number for collecting Social Security benefits. Your advisor can look at your full retirement picture (savings, investments, pensions and other income) and help you calculate whether you’ll need Social Security to supplement your income early on, or whether it makes financial sense to wait.

David Kimura is the CUSO Financial Services LP investment program manager for Hawaii State Investment Services at Hawaii State Federal Credit Union, providing investment, retirement and financial planning services to members. He can be reached at or 447-8083.

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