When to take Social Security

Next year N.C. State University economist Mike Walden will be eligible for Social Security. He explains the factors that go into deciding when to begin receiving the monthly checks.

“Well , this is the big trade off that people … my age face. You can start taking Social Security at different years. Obviously, you can take it in your early 60s, but you can actually delay taking it until age 70. This actually sets up a classic trade off, because the earlier you take Social Security, the lower your monthly checks. The later you take Social Security, the higher your monthly check. So it’s a tradeoff here. Do you get less now but get it sooner? Or do you get more later, but obviously take it later?

“Now you can use some fancy statistical and mathematical techniques to figure this out. Something called present value, which will actually convert those streams, if you will, of alternative incomes to one number that you can compare.

“But other people like to use rules of thumb. I think, obviously, one rule of thumb is if you think you’re going to live longer — and, of course, no one knows that — if you have a family history of people in your family living a long time, that would lead you to wanting to wait and take it later, get those higher checks, (rather) than receive those higher checks for a longer period of time.

“Also, lower interest rates today are working in favor waiting, because one of the benefits of taking that money now is you could invest it and accrue some earnings over time, but investment interest rates are very, very low.

“So this is an example of where you do want to put some pencil to paper, do a little math, work with someone who’s knowledgeable about this, if you’re not, because it’s a very, very important question to answer for most people.”