When should you take Social Security?

(MoneyWatch) The foremost question for Americans approaching retirement age is when to start collecting Social Security. It's a complex topic, and personal finance expert Mike Piper does an excellent job of clarifying the decisions in his short book, "Social Security Made Simple." Here are three key points to keep in mind to help you decide when to begin drawing Social Security:

1. People who are in good health and have enough savings to live on are better off waiting until age 70 to take Social Security. Considering the amount paid goes up each year, this provides the opportunity to buy longevity insurance at a price much lower than any insurance company charges.

2. For married couples, it's especially beneficial for the higher-earning spouse to delay taking Social Security until age 70. If the spouse with the higher benefit (generally the high income-earning spouse) dies early, then the surviving spouse receives that higher payment. So if either spouse has a long life expectancy, it pays to wait.

3. For married couples, there are some clever strategies to get higher payments without risk. In certain circumstances, a spouse can file a restricted application, earning a spousal benefit while his or her own benefit continues to grow. In other cases, a spouse filing and immediately suspending benefits allows the husband or wife to collect benefits.

As I mentioned, these are general guidelines that Piper expounds on and explains clearly in his book, as well as when they may make sense for you. For instance, if you've recently started collecting benefits and you now regret that decision, you will have 12 months for a do-over. The government previously had an unlimited time frame to make changes, but that's no longer allowed.

To view your earnings history or run various scenarios to see how much you'd collect under the federal retirement program, go to the Social Security Estimator. Be aware that there may be an error in your earnings history, which Piper shows how to correct. I love the instant estimate and scenarios that can be run from this calculator, including how many more years you decide to work and at what pay.

If you've ever wondered how individual Social Security benefits are figured, Piper's book shows the calculations. He explains the tax ramifications of Social Security payments. He then goes into particular situations, such as  child benefits and the impact of an outside pension plan.

I've reviewed many mind-numbing books and long technical booklets on Social Security, and none comes close to the crisp clarity of Piper's book. The generalities I've offered in this short piece are further explained in Social Security Made Simple. The book is as easy to read and as insightful as the investing strategies in his award-winning Oblivious Investor blog.

With the concerns about the nation's budget deficit, of course, you may ask whether some of these rules might no longer apply if the federal government starts means-testing or reducing benefits. I posed this question to Piper, who responded that all mainstream proposals for shrinking the deficit do not impact those age 55 or older. He also said that even the more aggressive deficit-reduction proposals kicking around Washington wouldn't invalidate the guidelines outlined in his book.

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    Allan S. Roth is the founder of Wealth Logic, an hourly based financial planning and investment advisory firm that advises clients with portfolios ranging from $10,000 to over $50 million. The author of How a Second Grader Beats Wall Street, Roth teaches investments and behavioral finance at the University of Denver and is a frequent speaker. He is required by law to note that his columns are not meant as specific investment advice, since any advice of that sort would need to take into account such things as each reader's willingness and need to take risk. His columns will specifically avoid the foolishness of predicting the next hot stock or what the stock market will do next month.

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