Related: Your 3 biggest Social Security questions answered
If you go ahead with your plan to take benefits early, your Social Security payment would be $9,742 at age 66. That’s $3,247 less than the $12,989 you would be entitled to had you waited until age 66 to collect. But you’ll also have those four years’ worth of Social Security payments you invested. Assuming you invested all of those benefits in a broadly diversified 50% stocks-50% bonds portfolio that returned 5% a year, those early payments would be worth $41,918.
So the question is: Are you better off with the lower Social Security payment plus the $41,918, or waiting for the higher payment for life?
One way to answer that question is to see how long that $41,918, plus future investment earnings on it, would last if you withdrew just enough each year so that the withdrawal plus your lower Social Security payment would match the higher full-age benefit.
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Walter Updegrave is the editor of RealDealRetirement.com, a site that offers easy-to-understand advice on retirement planning. Walter was previously an editor at MONEY Magazine and wrote the Ask the Expert column for CNNMoney.com. Walter has written four books on retirement planning and investing, including We’re Not in Kansas Anymore: How to Retire Rich in a Totally Changed World.
Follow him @RealDealRetire or if you would like to ask him a question, send it to walter@realdealretirement.com.
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