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Boost your Social Security payout by $100,000

(MoneyWatch) The most important decision you'll make regarding your Social Security income is when to start receiving benefits. Welcome back to the second week of posts on Social Security as part of my 16-week series on planning your retirement.

If you're married, then your spouse faces the same decision regarding their spousal benefit based on your earnings. But your situation becomes more complex if your spouse also worked most of his or her career and will be receiving a significant Social Security income based on his or her own earnings record.

To help you determine the best age for you and your spouse to start benefits, I'm going to borrow some words of wisdom from author Andy Landis, who offers an excellent description of the considerations you need to take into account in the latest edition of his book, Social Security: The Inside Story. According to Landis, here's what you have to do: "Remember two numbers: age 78 and age 82-1/2." Let's see why he says this.

We're going to look at three people born in 1951, all currently earning $75,000 per year and all earning similar amounts in prior years, adjusted for wage inflation. All three plan to stop working at age 62. Person A plans to start Social Security at age 66 (the Full Retirement Age, or FRA, for these three individuals). The initial monthly income for this age-66 starter will be $2,000 per month. Person B plans to start Social Security at age 62 and will receive $1,500 per month. Person C is going to wait until age 70 to start Social Security and will receive $2,640 per month.

Landis's yardstick for Social Security success is the total amount of income you'll receive over your lifetime. Using this yardstick, the age-62 starter will be "money ahead" of the age-66 starter during the early years of retirement because of the four years of payments the age-66 starter missed by waiting to start benefits until age 66. But, according to Landis, the age-66 starter will catch up to the age-62 starter by age 78 and will thereafter be money ahead. By age 85, the age-66 starter will be ahead by $42,000.

You can start receiving Social Security income as early as age 62, but your income is increased significantly for each year that you delay starting benefits until age 70. There's no increase for starting benefits any time after your 70th birthday.

Now let's compare the age-66 starter with the age-70 starter, using the same logic. The age-70 starter will catch up to the age-66 starter if he or she lives to age 82-1/2. By age 85, the age-70 starter will be money ahead of the age-66 starter by $19,200 and money ahead of the age-62 starter by $61,200. If the age-70 starter lives to age 90, he or she will be money ahead of the age-66 starter by $57,600 and money ahead of the age-62 starter by $129,600.

Do you think you'll live to your late 70s or early 80s? There's a very good chance you'll make it to these ages if you don't smoke or abuse alcohol, keep your weight at a healthy level, and eat a balanced, low-fat diet. So if you think you'll live until age 78, then waiting to start your benefits until age 66 is the best strategy. And if you think you'll make it to age 82-1/2, then waiting to start benefits until age 70 is the best strategy for you.

The difference in total benefits is one very important reason why estimating your life expectancy should be a critical part of your retirement planning. Two good websites that offer calculators to help you do this are and

The "money ahead" amounts shown above are just for one person; a married couple can gain higher amounts by carefully selecting the start date for each spouse, which could easily add more than $100,000 in payouts over their joint lifetimes.

Of course, Landis's analysis doesn't reflect such factors as inflation, cost-of-living increases, possible benefit cuts, taxation of Social Security benefits, investment earnings, and wage earnings after age 62. But I've seen other analyses that do consider some of these factors (and significantly complicate the analysis), and they still result in nearly the same conclusions regarding "break-even" ages.

But don't let all the numbers you'll have to deal with intimidate you -- it's well worth your time to do the math and make informed choices about when to start your Social Security benefits. It could put many thousands of extra dollars into your retirement pockets. Stay tuned for my next post that discusses Social Security strategies for married couples.

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