As expected, my recent column on when people should start drawing Social Security benefits brought a bunch of follow-up questions.
For example, Bob wrote that he retired from civil service 12 years ago and did not receive Social Security for his 29 years in civil service.
"I have been working part time since then where I do pay into Social Security," Bob wrote. "I am now 64 years old. At 62 I went to apply for Social Security not knowing about the civil service provision, so I withdrew my application. ...
"My question is this. If I quit work at age 65, this coming May, would it be better for me to start receiving my (Social Security) benefits or wait till age 67, my (Social Security) retirement age because I was born in 1943? By not working for two years would the monthly ... payment increase enough to justify the two-year waiting period?"
For help answering Bob's question and others I've received, I went back to one of my sources for the first column, Sharla Jessop of Salt Lake-based Smedley Financial Services.
Sharla says Bob's questions are so specific that he would be best served by contacting the Social Security Administration. Personnel there should be able to give him estimates for the different scenarios he mentioned. He may even be able to ask online at www.ssa.gov.
"(He can) go right to Social Security and tell them the different scenarios and ask them to prepare some estimates for him. ... It takes awhile to get them back, but most people are looking at more than a couple of weeks to make this kind of decision," Sharla says.
Another reader, Linda, wrote that she is 62 years old and her husband died 13 years ago. He would have been 67 next month. She recently returned from a mission and is thinking of pulling out her husband's Social Security benefits.
"I only have a pension of $1,500 a month (plus I can draw on my Merrill Lynch account)," she wrote. "I was thinking I could start drawing on the Social Security now even though it may not be as much monthly money but it would be for a longer period of time. What would be your advice?"
Sharla says that, even though Linda's deceased husband would be 67, the benefits she would receive are based on her age. Since she is 62, she will receive reduced benefits if she starts taking them now.
If, on the other hand, she waits until her full retirement age, she will get the full benefits. And that is the course Sharla recommends.
Because Linda — like all women — has a longer life expectancy than the average man, she'll want to have the maximum benefit for as long as possible. The only way to get that, Sharla says, is to delay taking benefits.
"Statistically, women have long life expectancies and issues with inflation and other things to consider further down the road," Sharla says.
Finally, Bill wrote in with a question about what to do with his Social Security benefits to offset income taxes.
"I will be eligible to collect without penalty in May of 2008," Bill wrote. "I do not plan to retire and don't want to leave the money until I'm 69 or 70. So I plan to get the benefits, but I know I'll have to pay taxes on 85 percent of the dough. I have a 401(k) and a traditional IRA. Can I increase my 401(k) deduction and put more money into my IRA to offset those taxes? My wife and I will probably get close to $2,700 a month collectively."
First, Sharla recommends that Bill wait to start drawing benefits. If he puts it off, his wife will have higher benefits in the future.
"He should think of it from the perspective of what's going to happen to his surviving spouse if something happens to him," Sharla says.
Regarding Bill's tax question, she says he does have the option of deferring income up to $20,500 in a 401(k).
"He can defer that, and if he's eligible, meaning he would have to have a lower income, he could still put money into a deductible IRA as well," Sharla says. "That may be one of the only options he has to defer income and reduce some of his taxable income."
I hope this helps you out, folks. And if any other Social Security questions are floating around out there, please send them in.
Or, if you have a financial question on a different topic, I'd like to hear it, too. Send questions or comments to gkratz@desnews.com or to the Deseret Morning News, P.O. Box 1257, Salt Lake City, UT 84110.
E-mail: gkratz@desnews.com