Wednesday, August 18, 2010

ABC's Hobson gives primer on Social Security Benefits 101, especially taking early retirement

Melody Hobson gave a presentation of “Social Security 101” on ABC Good Morning America on Wednesday, Aug. 19.

She said that your benefit goes up about 6% every year that you wait up to age 70. If you start benefits at age 62, early retirement, you get only 75%, with a lifetime payout pivot at about age 78 (a bigger problem for women). At full retirement age you get 100%, and at age 70-1/2, the latest possible age, it’s 132%. If you take early or full retirement, and then get a good job, you can pay back social security, wait, and take it out again at 70-1/2 at the higher rate.

One problem is that many corporate defined benefit plans have social security offsets and bridges presuming that the retiree will start benefits at 62, and many employees have cut older workers loose with buyouts on that assumption.

For married couples, she recommended that the lower earning spouse take early retirement at 62, and the higher earner take it at 70-1/2.

She did discuss the Annual Earnings Test for early retirement, with the loss of $1 for every $2 for anything earned in wages (not pensions or investments) over the maximum (which is not much). She did not justify it.
She noted an AARP finding to the effect that 14% of elderly retired Americans depend on Social Security for all their income, and 50% say that they will get more than 50% of their income from Social Security.

Melody’s article is here, title “Considering Early Retirement? Mellody Hobson's Tips for Social Security Benefits: Financial Contributor Mellody Hobson Gives Expert Advice.”

She also recommends visiting the site of the Certificed Financial Planner Board of Standards, here.

Social Security’s table on retirement ages is here.

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