Consider a 61-year-old whose earnings and work history would qualify for an estimated maximum monthly benefit of $1,931 at retirement in 2006. Retiring at 62 next year would permanently cut the benefit to $1,444, while working until 70 could boost it to $2,697 (table). The top benefit for someone hitting 65 this year is $1,660, but depending on past earnings the amount for many might be about $800 to $1,500. A worker's spouse can get up to half the full amount, or more if he or she worked and qualifies for independent benefits.

Getting dizzy? "Even financial advisers get overwhelmed by the complex, changing rules," consoles Bryan Place, a retirement planner in Manlius, N.Y. It's no wonder people must often revise their plans. Place says one client, a quarry foreman, was set to collect benefits at 62, while continuing to work part time. But he hadn't counted on the penalty: A loss of $1 of benefit for every $2 above a ceiling on what early retirees can earn--$11,280 for 2002. As a result, he decided to fully retire. If he were 65 it would be a different story. Because of legislation in 2000 there is no cap on job earnings after the standard Social Security retirement age. And in some cases, working while also collecting benefits can increase your monthly check if the job lifts your average lifetime earnings.

Catching up. Another client, an engineer, recently started collecting benefits at 70, after having continued to work past 65. He viewed the extra years as a way to help make up for the times he missed putting money into his 401(k) retirement plan.

There are often good reasons for people who stop working to take Social Security at 62 even if the money isn't needed. Those with other sources of income may take benefits early with the idea that they can invest the money and more than make up for the reduced monthly checks. Some take benefits early so that they can leave other funds untouched in tax-sheltered retirement accounts. And some who distrust the future viability of Social Security want all they can get now. One factor that muddies the now-or-later decision, says adviser Mark Cortazzo of Parsippany, N.J., is that "people often overestimate both their life expectancy and the investment returns they can get outside of Social Security."

As a practical matter, the decision on taking benefits is often dictated by necessity. "People who are laid off, ill, or unable to find work may need the benefits as soon as they can get them," notes San Francisco attorney Joseph Matthews, coauthor of the consumer guide Social Security, Medicare & Government Pensions. For others, the question is whether they want to keep working. For those who do, it often doesn't make sense to collect benefits early. Not only can the job income cause a loss of benefits, it may boost overall income enough to make more of the Social Security benefits that are received taxable. Benefits are generally taxed when half of the annual amount you receive plus your other income exceeds a ceiling--$25,000 for a single person, $32,000 for a couple filing jointly. Depending on your income, as much as 85 percent of benefits may be treated as taxable income. And, adding insult, you'll pay income and Social Security tax on the job earnings. Combined, these bites can sharply reduce the net gain from working. Whether because of a job or investments, about a fifth of Social Security recipients pay income tax on their benefits--though the number is growing.

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