Time to Rethink Your Social Security Plan

The Social Security Act was signed into law by President Franklin D. Roosevelt on Aug. 14, 1935, and monthly benefits began in 1940. The original retirement age was set at 65 years of age, but not because so few people lived to that age, according to the Social Security Administration. While life expectancy at birth was less than 65, most Americans upon reaching adulthood at that time could expect to reach age 65.

While longevity has increased significantly, the agency says it's the sheer size of the baby boom generation that presents the biggest challenge.

Already, the agency is trying to ease the pressure by raising the age at which retirees receive full retirement benefits, from age 65 for those born before 1937 to age 65 and two months for those born in 1938 and so on. The revised schedule marches upward, to age 66 for those born between 1943 and 1959, and to age 67 for those born after 1960.

Anyone can elect to retire early at age 62, but benefits are reduced a fraction of a percent for each month before full retirement age. A 62-year-old today opting to start receiving a Social Security pension this year takes a permanent 24.17% cut in prospective full benefits.

If you choose to work while taking Social Security before your full retirement age, however, you will be penalized $1 in benefits deducted for every $2 earned above $11,640 in 2004. Once you reach your full retirement age, you can receive benefits with no limit on earnings.

Just consider Gene and Dee Balliett of Balliett Financial Service in Winter Park, Fla., ages 73 and 72 respectively, who happily practice what they preach.

"We've long told our clients that retirement can mean being unemployed and useless at 65, or it can mean finding a way to continue working in a job they love," says Gene. They recommend either getting a new career, or cutting back on a current one, as the couple have done, by delegating tasks they dislike to others.

The Ballietts had put off taking Social Security benefits until the maximum age of 70. Ditto for their retirement plans at age 70 and a half. They now receive $42,000 plus from Social Security and say they still make a decent living by working.

It works for them.