If you reach the average life expectancy, it doesn't matter what age you are when you sign up for Social Security. Retirees who claim their due at 62 receive lower monthly payments for a longer time, while those who delay retirement have higher monthly payments condensed into fewer years. But individuals who live longer than average will come out behind if they claim early. "The risk of taking up Social Security when you are young is you could lock yourself into a lifetime of relatively low retirement benefits," says Richard Johnson, a senior fellow at the Urban Institute. "That's something that could come back to haunt a retiree in their 70s and 80s when their out-of-pocket healthcare costs start going up and they might wish they had an extra $100 or $200 in benefits."
Jim Lord, 63, of Taunton, Mass., calculates that his break-even point is age 77. "If I live past 77, then I should have done it differently," he says. Lord, a former retail design consultant, originally wanted to retire at age 65 but signed up for Social Security in October 2008 after a layoff. "I didn't have any choice," he says about his early retirement. But Lord admits that he enjoys the extra time for golf and going to the gym.
Retirees who find work again can suspend their Social Security benefits or even repay all of the benefits received and restart their benefits at the higher rate. "It's kind of an interest-free loan," says Reimringer, who plans to try to pay back the Social Security benefits he received and then reclaim at a higher rate at age 70 if he finds a full-time job. "If you're strategic about it, you can use your Social Security benefits like unemployment insurance just to get you over the hump," says Wellesley's Levine. But, he cautions, "very few people who start claiming their Social Security benefits stop claiming them."
This safety net for seniors is a valuable source of emergency income that workers shuttled into an unplanned retirement before age 62 don't have. Philip Staros, 57, claimed his pension and unemployment insurance when he was laid off from MTV networks in December 2008. But that wasn't enough to make his mortgage payments, and his Islip, N.Y., home went to foreclosure. Awaiting the notice to vacate, he works part time for MSG networks, earning just 40 percent of his former six-figure salary. "I was forced to retire. I took retirement pay to get out of completely starving," he says. "I originally wanted to retire at age 62, the first chance I could collect Social Security."
No desire to retire. Most current workers (64 percent) say they plan to retire at age 65 or later or never retire, according to a 2009 Employee Benefit Research Institute survey. But retirement is something that can happen while you are making other plans. Almost half of current retirees left the workforce earlier than their desired retirement age, the survey found. "People want to work longer, but a lot of people find out that they just can't," says Johnson. "Either their health gives out or they can't find a job or they lose the job that they have." Some 72 percent of the retirees said they ended up retiring before their 65th birthday. Many of those who retired early said they left the workforce because of a health problem or disability (42 percent), a downsizing or business closure (34 percent), or to care for a spouse or family member (18 percent). Sometimes many of these problems can hit a previously healthy and employed person at the same time.
Deborah Zamudio, 60, retired from her administrative assistant position in June 2009 to care for her husband, who was diagnosed with early-onset dementia. Her unplanned early retirement necessitated major cost-cutting. She downsized from a $1,475 apartment in Milpitas, Calif., to a $540-per-month Utica, N.Y., apartment. "There's no way I could have stayed in California and not worked," she says. "If you have to take early retirement, try to relocate to a less expensive area."