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By Christine Benz | 03-21-2013 12:00 PM

Thinking Through Your Social Security Options

T. Rowe Price senior financial planner Christine Fahlund explains how the firm's new Social Security Benefits Evaluator tool helps investors walk through the key considerations when formulating a Social Security filing strategy.

Christine Benz: I'm Christine Benz for Morningstar.com. 

The decision about when to claim Social Security benefits is a complicated one, and it's even more complicated for married couples. Joining me to discuss this topic is Christine Fahlund; she is a senior financial planner with T. Rowe Price.

Christine, thank you so much for being here. 

Christine Fahlund: My pleasure.

Benz: You have launched a new Social Security Benefits Evaluator tool, Christine, and before we talk about the tool and how it works, I'd like to start by talking about why Social Security is such a valuable benefit in people's retirement plans? 

Fahlund: It is something you've already paid, for starters. It's guaranteed income backed by the U.S. government that lasts a lifetime, so it serves as longevity insurance for you, and it's adjusted for inflation. So, it has everything, and you've paid for it already. So, it's something that you need to take very seriously when you make your decision as to when to take it and how to take it.

Benz: Let's talk about why you think investors really ought to give due attention to this decision about when to claim benefits? Why is it such an important decision? 

Fahlund: It is an incredibly important decision, because when you start at 62 instead of 70, you are missing out on an 8% increase in your benefit every year you wait. So, by the time you get to 70, if you were to compare the extremes of starting at 62 or taking it at 70, the difference is almost double the income for the rest of your life, increased for inflation, as you go along.

Benz: OK. So, generally speaking waiting will deliver a big payoff. 

Fahlund: Yes.

Benz: One thing that the Social Security Benefits Evaluator lets you do is, it lets you choose your goal for Social Security income, and most of the tools … certainly when I hopped on the tool, I thought well, I just want to maximize my benefit over my lifetime, and my spouse's lifetime, I want the biggest cumulative benefit. 

Fahlund: Right.

Benz: Let's talk about some reasons why someone might have another goal in mind--specifically, why someone might in fact want to start benefits at 62? 

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