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Think Twice About Social Security for Early Retirement

By Howard Rothman

NEW YORK ( MainStreet)--While all of us have different ideas about what we're going to do when we retire, it's a safe bet that none of us is planning to struggle financially. Yet that is precisely what could happen despite our best intentions, especially if we're forced to exit the working world earlier than we anticipated.

Some serious thought about Social Security and the time and manner that we start our benefits, though, could make things easier down the road.

Alarmingly, two in three Millennials expect to retire by the age of 65, but almost 70% of them have yet to take any steps in planning or saving for it, according to a GfK survey conducted on behalf of MainStreet. Social Security, often viewed as an increasingly antiquated and insecure font of retirement income, has more Baby Boomers (85%) expecting it as a top source of planned retirement income than any other source. Even 54% of Millennials count SS as a top source of retirement income. Whereas Millennials more commonly cite employee-sponsored retirement savings plans (64%) and bank savings accounts, money markets and CD plans (63%) as a top source of retirement income, 65% and 61% of Boomers cited those sources, respectively, far below the expectations for Social Security.

The SS popularity may not fully come as a surprise. The decision on when to retire is based on many factors, but some of the most pivotal, particularly health issues and the loss of a job or job opportunities, are out of our control. Considering recent economic events, it's not surprising to learn recent studies by the Stanford Center of Longevity and Metlife Mature Marketing Institute indicate that the number of those who leave work involuntarily is growing. Or that this group now comprises the majority of all retirees.

One result has been more of us electing to take Social Security payments earlier than we should, with those out of the workforce routinely filing as soon as they can. Experts, though, insist this may be the wrong course of action. "As long as they are eligible, many Americans equate the date they retire with the date they file for Social Security," says Bill Meyer, co-founder of a private research and counseling firm called Social Security Solutions. "Instead, retirees should separate those decisions and look at Social Security as if it's another asset in their portfolio."

Most economists agree that delaying these payments, especially in the current era of low interest rates, may produce the most positive financial outcome. One reason is that applying for benefits before "full retirement age" -- which varies by birth year but is around 66 for most Baby Boomers -- will trigger early-filing benefit reductions that significantly cut available resources down the road when they might be more critical.