Social Security For Dummies. Jonathan Peterson

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       Eager Edgar dreams of retiring from his job as a warehouse manager and trekking through the wilderness while he still has the energy. His parents died young, and he views early retirement as his last sure chance to really live. He has a couple hundred thousand dollars in an individual retirement account (IRA), and his rent is modest. The month after he turns 62, Edgar collects his first Social Security payment of $1,600.

       Steady Betty sees the world differently. She likes her accounting job, even though the commute is increasingly stressful. But Betty doesn’t want to worry about money when she’s older, and she knows her mother lived until 90. Betty decides to wait until she reaches 66 (her full retirement age) before claiming Social Security. The prospect of getting a bigger monthly payment and building her nest egg further gives Betty peace of mind.

       Fast-forward a few years. Eager Edgar’s arthritis is getting worse, and his medications are costing more and more. After a couple of adventures in the Rocky Mountains, his hiking equipment begins to gather dust. Unplanned costs for healthcare, a loan to his unemployed son, and the rising cost of living reduce Edgar’s savings. A long stint in a nursing home costs him $30,000. For the last three years of his life, Edgar is obsessed with the fear that his savings will run out and he’ll lose his independence, all because he has to survive on the reduced Social Security benefits he chose. He takes to splitting pills in half, which increases his pain. He dies at 84, a lot later than he expected.

       Steady Betty sticks to her plan, putting away savings every month. At 66 she begins collecting her full retirement benefit of $2,133 and enjoys a fulfilling new chapter. A fatal aneurysm brings her life to an abrupt end, midway through her 74th year, much earlier than she expected.

       “I can make the money grow and come out ahead.” This is the economic principle that money today will be worth more tomorrow, through investments and a helpful boost from rising interest rates. You may be able to come out ahead, but there’s a guaranteed reward for collecting Social Security later — several percent a year between age 62 and your full retirement age, and 8 percent per year after that up to age 70. And remember: That’s on top of inflation protection. Years ago, retirees could, at the least, plunk down money on risk-free certificates of deposit (CDs) and look forward to steady gains. These days, CDs barely pay anything — and you’re aware of the uncertainties of the stock market. But maybe you’re blessed with financial savvy. Maybe you have the skill to outperform the markets year after year and the discipline to stick to your program. To come out ahead, that’s what you’ll need to do, especially if you live a long time. For most people, relying on a bigger Social Security benefit as a firm foundation of retirement security is easier.

       “I want a new life.” If you hate your job or you’ve been waiting for a chance to reinvent yourself (say, by launching a small business), a guaranteed Social Security payment may seem like just the ticket to get started. Of course, you should try to pursue your dreams. Just be aware that your interests may change and business ideas may fail.

       “I could get hit by a bus. Why leave money on the table?” Yep, you could get hit by a bus. But however fatalistic your view, the reality is that a 60-year-old man has a greater chance of dying in his sleep at 85 from various ailments than coming to an accidental finale much earlier. Why not make sure that you have the finances you need in the meantime?

       “I’d better get my share before Social Security goes bust and there’s nothing left.” This belief strikes a chord with some people. After all, you’ve been hearing doom and gloom about Social Security for years. But as a strategy for collecting your benefits, it’s a bad idea. Most proposed reforms would not hit retirees or near retirees. When Congress voted in 1983 to raise the full retirement age, for example, the impact came far in the future, affecting people who reached full retirement age in 2000 and beyond.