I just turned 62, I’m a self-employed professional woman and 1.) in the last thirty months I mined my entire retirement provisions EXCEPT SS to pay for the protracted (and otherwise unfunded) end-of-life costs of both a 95 year old parent and a partner; 2.) being of necissity absent from it, my business is stalled, and 3.) I’m emotionally and physically exhausted from it all.

Any comments on how to evaluate whether I benefit more if I claim SS now at 62 with its attnendant penalties – which will still require additional income to live — or cobble together a new business or other (modest) employment for the next four and a half years?

Also, the money you earn helps raise the payment later on.

My link above from this comment to to a post on my blog that explores in greater detail the possible benefit from delaying SS benefits.

The article points out that for a married person, the cost of the SS benefits lost waiting for a year is less than the cost of buying the annuity on the open market.

Being a single person, the cost of a single-life annuity is less. But running the numbers, I also would come out ahead by waiting a year. And if SS benefits drop to 75% of what they are now, I still come out about even.

Who loses out from such an approach? Your heirs, if you die earlier. I don’t think that is an important consideration. Best thing you can do for your heirs is manage your retirement so you don’t depend on them.

http://assetbuilder.com:9669/blogs/scott_burns/archive/2006/09/30/A-Real-Life-Case-for-Delaying-Social-Security-Benefits.aspx

Munnell, et. al. state that payments are set to be “actuarially fair” with respect to taking benefits earlier than full retirement age, which ranges from 66 to 67 depending on your current age. Obviously, you can model the problem with a range of investment return assumptions that will seem to shift the decision one way or the other. But, if you start with the presumption that the payout model is set up to be neutral for the average person, then you need to determine how you in particular (and your spouse) might differ from the average.

Assuming that you do not absolutely need the money to live on, then you might make this timing decision on other factors. Some of the more important factors that comes to mind is relative health and history of longevity in the family. If you and/or your spouse are relatively more (less) healthy than your peer group in your early 60s (when you are first faced with this decision), you might choose to delay (accelerate) accepting Social Security payments. Similarly with family longevity. No matter what, it’s a crap shoot from the standpoints of health, longevity, investment returns, etc., because the future is fundamentally unpredictable.

My two cents, The Skilled Investor

The bottom line is that all the differences in these calculations are overwhelmed by the uncertainties of the actual size of the future payments since Congress can do anything they choose. Since there is much more likelihood that because of funding issues SS payments will be reduced than increased in the future (either directly or through higher taxation or by extending the means testing), all signs are that one should start taking payments as soon as possible after the $1 for $2 penalty period is passed (currently 66).

Then I recalculated NPV, based on an interest rate of 1.7% which is the difference between the 5.2% you used and a Social Security COLA of 3.5%. The results for NPV:
Age 62: $341223
Age 66: $362624
Age 70: $364956
This shows an increase in NPV for waiting to retire. And that the COLA is important. You suggested ignoring COLA if it matched inflation, but your discount rate should also be adjusted for inflation.

Also suggests that the break-even age is less than 85 years of age. Perhaps the 75 -78 years of age on the calculator provided on the SSA website.