a guide to starting social security benefits

8/2/2019 A Guide to Starting Social Security Benefits

1/9Electronic copy available at: http://ssrn.com/abstract=1192902

Illinois Law and Economics Research Papers Series

Research Paper No. LE08-025

A Guide To Starting Social

Security Benefits

*Richard L. Kaplan

*Peer and Sarah Pedersen Professor of Law, University of Illinois

This paper can be downloaded without charge from the Social Science Research Network

Electronic Paper Collection:

http://papers.ssrn.com/pape.tar?abstract_id= 1192902


2/9Electronic copy available at: http://ssrn.com/abstract=1192902

When a person should begin taking Social Security retirement benefits is a critical

question for planning ones retirement. This article explains the various factors at play indetermining the optimum starting point, including: longevity considerations; spousal

implications, whether for a previously employed or a previously unemployed spouse; the

impact of post-retirement employment; the availability of health insurance prior to

Medicare eligibility for the worker and the workers spouse; alternative sources ofretirement income, including distributions from retirement savings plan assets and lifetime

liquidation of nonretirement assets (and the pertinent income tax ramifications); and

anticipated investment strategies.


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2008 R.L. Kaplan

Richard L. Kaplan, J.D. is the Peer and Sarah PedersenProfessor of Law at the University of Illinois where he teachesfederal income taxation and elder law. He is the co-author ofELDERLAWINA NUTSHELL (4th ed. 2006, Thomson/West Pub-

lishing Co.) and the faculty advisor to THE ELDERLAW JOURNAL.

A Guide to StartingSocial Security Benefits

By Richard L. Kaplan

Richard L. Kaplan explains the range of factors that must beconsidered when determining when to begin receiving

Social Security payments.

Adilemma central to retirement planning for

many individuals is determining when is themost opportune moment to begin receiving

Social Security retirement benefits. As this articlewill demonstrate, this inquiry must consider a widerange of factors, both economic and otherwise, if aninformed choice is to be made. To be sure, some folksmight commence such benefits out of a fear that theSocial Security system will soon run out of money,1but people generally approach this question withthe objective of determining the most advantageouscourse of action for their particular circumstances.This article explores the components of that decision-making process, while eschewing absolute rules ofthumb for specific situations.

Early Retirement Option

The U.S. Social Security system authorizes retirementbenefits to begin as early as age 62 at the election ofthe prospective beneficiary.2 But any recipient whocommences these benefits prior to reaching his or herfull retirement age faces a reduction in the amount ofthose benefits to take account of the early starting date.3

For most of Social Securitys existence, a persons fullretirement age was 65 years, but a 1983 reform of thesystem raised that age gradually to age 67, dependingupon the year of a persons birth.4 We are currently in

the middle of that phase-in period such that persons

born between 1943 and 1954 have a full retirementage of 66 years.5 At the time of this change, however,Congress did not alter the earliest possible age at whicha person can claim retirement benefits, which remains62 years. As a result, the early retirement penalty fora person whose full retirement age is 66 years hasincreased to 25 percent.6

Example 1. If Hannah would otherwise be eligiblefor a monthly Social Security retirement benefitof $1,000 at age 66, she will receive only $750should she begin receiving Social Security retire-ment benefits at age 62.

This reduced payment, moreover, will notreturn to $1,000 when Hannah reaches fullretirement age. That is, the early retirement reduc-tion is permanent, a fact that may have long-termeconomic consequences to Hannah.

Delayed Retirement Option

On the other hand, if a person chooses to defer re-

ceipt of Social Security retirement benefits past herfull retirement age, a delayed retirement bonus isadded to the payments that she receives.7The amountof these delayed retirement credits varies by a personsyear of birth, but at this point, it is eight percent peryear for each year that benefits are delayed beyonda persons full retirement age.8

Example 2. If Hannah in Example 1 delayed herretirement benefits until she reached age 68, she

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4/936 2008 CCH. All Rights Reserved.

would be entitled to two years of delayed retirementcredits or a 16 percent addition (2 years 8%),producing a monthly Social Security payment of$1,160 (full benefit of $1,000 + 16%, or $160).

There is a maximum age, however, for earning de-

layed retirement credits of 70 years, after which anyfurther postponement of benefits does not augmentthe amount of a persons monthly payment.9

Impact of Inflation

All Social Security benefits are adjusted annuallyfor the national cost-of-living increases,10 and thesepercentage increases are independent of whetherthe benefits received are early, on-time, or delayedretirement benefits. That is, the annual percentagecost-of-living adjustment (COLA) would apply either

to Hannahs early retirement benefit of $750, her fullretirement age benefit of $1,000, or her delayed re-tirement benefit of $1,160, in each case starting fromthe year in which she reached age 62. Accordingly,from an economic perspective, anticipated inflationneed not enter into the decision-making process withrespect to starting the receipt of Social Security retire-ment benefits, because the COLA percentages fromage 62 forward are added to whichever retirementbenefit that Hannah selects.

Longevity ConsiderationsFrom the governments perspective, the early retire-ment penalty and the delayed retirement credits arecalculated to be actuarially neutral. That is, the gov-ernment is economically indifferent as to when SocialSecurity beneficiaries elect to commence receipt oftheir retirement benefits. Individual clients, of course,are not so indifferent and that is why this issue is soimportant in retirement planning. Early benefits aresmaller in amount, but will be received for moreyears, all things being equal, while delayed benefits

are larger in amount, but will be received for feweryears, once again all things being equal. The questionthen becomes what the person estimates will be hisor her life expectancy. To put this issue in the starkestterms, getting less now in exchange for more latermakes sense only if there is, in fact, a later. Thus,the question inevitably turns at the outset on suchfactors as ones personal medical history, includingthat of ones natural parents, if known. This historymust be evaluated, however, in light of subsequent

medical developments. For example, if a parent diedat a relatively early age due to an ailment that is nowtreatable (such as heart disease), that changed medi-cal reality should be considered.

Multiple Decision Points

The clients decision is actually more economicallycomplicated, because commencing retirement ben-efits is not limited to a few specific ages. The SocialSecurity laws formulae for early retirement penaltiesand delayed retirement credits are actually calibratedin terms ofmonthsprior to, or following, a personsfull retirement age.11Thus, a person might start receiv-ing early benefits at age 62 years and three months,or 63 years and five months, or 64 years and eightmonths, and so forth. Similarly, the eight percent an-nual credits are adjusted so that a person receives a

bonus for delaying the start of retirement benefits foreach month of such delay, not simply entire years. Asa consequence, there are no fewer than 96 possibledecision points. That is, the eight years between theearly retirement age of 62 years and the maximumearning of delayed retirement credits of age 70 trans-lates into 96 starting points (8 years 12 months).Moreover, a decision to not start benefits in any givenmonth does not preclude commencement of benefitsin some subsequent month.

Implications for the SpouseThe Social Security statute provides that the spouseof a retired worker is entitled to a spousal benefitof half of what the worker would receive when thatperson would reach full retirement age.12

Example 3. If Hannah in Example 1 were entitledto receive $1,000 when she turns 66-years old,her husband Sol would be eligible for $500 at hisfull retirement age and lesser amounts should hebegin taking spousal benefits prior to that date.13

Sol would receive this benefit, however, onlyif the workers benefit that is based on his ownearnings record were less than $500.

That is, Social Security pays the spouse of a retireethe higher of that persons own workers benefit (ifany) and 50 percent of the retirees benefit.

But the significant point for this analysis is that aspousal benefit may be claimedonly if the workerspouse has started to receive Social Security retirement

A Guide to Starting Social Security Benefits

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benefits.14 In other words, Hannahs decision whetherto start receiving Social Security benefits determineswhether Sol can receive benefits as the spouse of aretiree. Accordingly, if Hannah decides to notstartreceiving her benefits, Sol cannot receive spousal ben-efits based on Hannahs work record. Thus, married

couples have this additional economic considerationto incorporate into their decision-making process. Inthis context, it should be noted that the federal De-fense of Marriage Act defines marriage exclusivelyas between one man and one woman for purposesof all federal statutes,15 and the Social Security lawis a federal statute. Thus, same sex marriages are notrecognized, but common law marriages are.

The Social Security law also provides that a surviv-ing spouse (and in some cases a surviving divorcedspouse) succeeds to thedeceased persons actual

Social Security benefit.16

Example 4. Assume thatHannah in Example 3was married to Sol andthat Sol survived Han-nahs death. Dependingon the amount of SolsSocial Security bene-fit based on his ownwork record, he mightbe entitled to a surviv-ing spouse benefit fromHannah if that amountexceeds his own workers retirement benefit.Hannahs decision to elect early retirement ordelayed retirement, therefore, might impact howmuch money Sol receives after Hannahs death.

In other words, the decision about when to com-mence receipt of Social Security benefits mustconsider not only the individuals projected lifeexpectancy, but also that of a potential surviving

spouse. And this need to include the expected pres-ent value of these survivors benefits in the benefitcommencement decision will be especially acute ifthe clients spouse is younger or in better health thanthe client in question.

Post-Retirement Employment

The decision to start receiving Social Security ben-efits is necessarily bounded by a separate but related

decision about whether the client plans to engagein compensated employment after doing so, and towhat extent. That is, does the client anticipate sup-plementing his Social Security benefit with part-timeor full-time but perhaps less remunerative employ-ment, including self-employment? At the outset,

it might seem incongruous for someone receivingSocial Security retirement benefits to continue work-ing, but both economic and non-economic factorsmay be at play, and this phenomenon is becomingmore common.

Availability of Health Insurance

The most significant economic factor is probablythe cost of health care. A beneficiary without healthinsurance can find himself quickly overwhelmed

financially if a major ill-ness or accident befalls

him in retirement. MostAmericans receive healthinsurance through theiremployer, at least if theyare working on a full-timebasis.17 While a retireemight secure heal thinsurance on his ownfollowing his departurefrom the workforce, thecost of individually issuedhealth insurance can beextremely high. That is,when the new retiree was

part of an employment-based group, his insurancepremiums were being subsidized economically byothers in that same group. But a 62-year old retireeseeking health insurance coverage on his own willlack that intra-group subsidy. For the same reason,health insurance might be unavailable regardlessof cost. That is, when this person was part of anemployment-based group, acceptance was guar-anteed as the insurer was obligated to accept all

current employees.18

When the retiree is on his own,however, insurability will be determined entirely byhis personal medical profile, and in many cases, thatwill translate into no health insurance at all.

This situation, of course, was precisely why thefederal governments health program for olderAmericans, Medicare, was created.19 But Medicare isgenerally not available until the prospective benefi-ciary is 65-years old.20That is, unlike Social Securitysearly retirement age option, which allows a person

In this context, it should benoted that the federal Defense ofMarriage Act defines marriage

exclusively as between one manand one woman for purposes ofall federal statutes and the SocialSecurity law is a federal statute.Thus, same sex marriages arenot recognized, but common

law marriages are.

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to receive benefitsalbeit permanently reducedbenefitsstarting at age 62, Medicare has no com-parable early retirement option available. As a result,a person who is planning to start Social Securitybenefits prior to reaching age 65 must consider theeconomic cost and availability of private health insur-

ance or should expect to work for an employer thatwill cover this person under that employers grouphealth insurance policy. Indeed, even a person whois 65-years old might need the automatic acceptanceof an employers group health insurance coverage ifhis spouse is not yet 65-years old and is uninsurableon her own due to pre-existing medical conditions,a not uncommon situation for persons in this agecategory. On the other hand, once someone reachesage 65, that person is eligible for Medicare evenif she is not yet receiving Social Security benefits.Thus, the need for health insurance might be a major

economic consideration in the commencement-of-benefits decision.

Possible Negative Impact onRetirement BenefitsAny Social Security recipient who has not yet attainedthe applicable full retirement age faces an onerousretirement earnings test that substantially reducesthe economic rewards from working.21 Basically, anywages or self-employment income above an annuallyadjusted threshold lowers the recipients Social Secu-rity benefits by $1 for every $2 above that threshold,22which in 2008 is $13,560.23

Example 5. Assume that Stacey is 63-years oldand earns $21,560 from part-time employmentin 2008. Stacey has $8,000 of excess earnings(earnings of $21,560threshold of $13,560).This excess will then reduce her Social Securitybenefits by half of this amountnamely, $4,000.So, if Staceys annual Social Security benefitwould have been $9,300, but for this retirementearnings test, her benefit will instead be only

$5,300 (original benefit of $9,300reductionof $4,000).

This provision has the same economic impact as a50 percent marginal tax rate on the affected earnings.Those earnings, moreover, are subject to a federalincome tax on income generally of at least 15 per-cent24 in addition to Social Securitys effective 15.3percent payroll tax on wages25 and self-employmentincome,26 a combined effective marginal tax rate of

over 80 percent and possibly even more, dependingupon a retirees other sources of income. In fact,additional income of $19,940 in 2008 would pushthis taxpayer into the 25 percent federal income taxbracket, raising that persons effective marginal taxrate to 90.3 percent.27 State income taxes would raise

this effective marginal tax rate still higher.On the other hand, the early retirement penaltythat Stacey in Example 5 incurred by electing to re-ceive Social Security retirement benefits before shereached full retirement age will be recalculated whenshe reaches that age to reflect the loss of benefits shesuffered this year. In effect, she will be treated asretiring some number of months later than she actu-ally retired. But that adjustment is small consolationin the current year, and its salutary effect is entirelycontingent on her future longevity. In brief, the op-eration of the retirement earnings test acts as a major

economic disincentive to take Social Security benefitsand engage in any remunerative activity beyond avery low level until the claimant reaches his or herfull retirement age.

Possible Positive Impact onRetirement BenefitsOnce a person reaches full retirement age, the re-tirement earnings test described above no longerapplies,28 and additional income from employmenthas no direct impact on the amount of that personsSocial Security benefits. In fact, employment fromthat point on might actually increasea persons So-cial Security benefits, depending upon that personsprior work history. That is, Social Securitys retire-ment benefit is based on a persons average indexedmonthly earnings (AIME), a construct that is basedon a persons 35 highest years of annual earnings.29If some of the 35 years that were used to calculatea persons Social Security retirement benefit hadvery low or no earnings, higher earnings in a lateryear would substitute for one of those low-or-noearnings years and would thereby raise her AIME, in

turn raising her Social Security retirement benefit.This possibility is particularly likely if the client hadperiods of low or no earnings due to child-rearingresponsibilities, care of an older relative, extendedhigher education, or the like.

The possibility of this economic enhancement,however, is subject to two caveats. First, only earningsthat are subject to the Social Security payroll tax arecounted for this purpose, and there is an annual capon such earnings. In 2008, that cap is $102,000,30


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which means that any earnings received that yearin excess of this amount are simply ignored whenrecomputing a persons AIME. Second, the relation-ship of Social Security benefits to a persons AIME isnot isomorphic. That is, the Social Security statuteemploys a deliberately bottom-weighted formula31

that has the economic effect of moderating the impactof higher earnings on Social Security benefits. As aresult, if Jacks AIME is twice that of Jills, Jacks SocialSecurity benefit will be higher than Jills, but not twiceas high.32This effect is especially pronounced as onesAIME gets above the first tier (or bend point in SocialSecuritys peculiar argot), which in 2008 was $711per month.33 At that point, further increases in a per-sons AIME will increase that persons Social Securitybenefit but by increasingly smaller amounts.

Alternative Sources of Funds

A further economic consideration in the decisionabout when to start receiving Social Security re-tirement benefits is whatother sources of fundingare available if a clientchooses not to start thosebenefits. In other words,what would the personlive on in the absence ofSocial Security benefits?

One possibi l i ty, of course, is employer-pro-vided pensions and/orretirement-oriented sav-ings arrangements such asIndividual Retirement Accounts (IRA), deferred salaryarrangements under sections 401(k), 403(b), and 457,and Roth-type retirement accounts. Some employer-based pensions, however, do not pay benefits beforesome specified age or do so only with fairly heavyearly retirement reductions. In any case, pensionplan payments are almost always fully taxable, as

are withdrawals from most IRAs and deferred salaryarrangements.34 Only Roth-type retirement accountspermit tax-free withdrawals if the accounts have beenopen at least five years.35 Even those withdrawals, how-ever, lose the benefit of further tax-free growth oncethose funds are taken out of their respective accounts,a major economic drawback to such withdrawals.

Social Security benefits, in contrast, are taxable onlyin part, that part depending upon a persons incomefrom all sources,36 including interest on municipal

bonds,37 which is otherwise free of federal incometax.38The exact formula does not warrant explicationhere,39 but a few parameters merit mention:

If an individual recipient has annual income fromall sources of less than $25,000, or a marriedcouple has annual income of less than $32,000,

Social Security benefits are not taxable at all.40

If an individuals income is between $25,000and $34,000 (or a couples income is between$32,000 and $44,000), a portion of their benefits,perhaps as much as 50 percent of those benefits,is taxable, with the exact percentage rising pro-portionately within the specified range.41

If an individuals income exceeds $34,000 (ora couples income exceeds $44,000), a higherpercentage of those benefits, but never more than85 percent, is subject to income tax.42

In any case, the bottom line is that only a portion of

Social Security benefits is subject to tax, in contrastto most retirement account withdrawals, which aretaxable in full. Moreover, Social Security benefits

are taxable in only 15 ofthe 41 states with broad-based personal incometaxes, while pension in-come is taxable in all butthree of those states.43

Another possible sourceof retirement funding isliquidation of nonretire-ment assets. Most of thoseassets, especially stocksand mutual funds as wellas investment real estate,

would qualify for a preferential long-term capitalgains tax rate of 15 percent or even less in somecircumstances.44 In contrast, to the extent that a per-sons Social Security benefits are taxable at all, thosebenefits would be taxed at ordinary income rates,which can go as high as 35 percent.45 And if one ofthose assets is the clients principal residence, the first

$250,000 (or $500,000 if married) of gain realizedfrom the sale of that residence would be receivedfree of income tax.46

In other words, many older persons might ex-perience lower tax rates by disposing of theirnon-retirement assets while postponing the receiptof Social Security benefits. On the other hand, elect-ing to take Social Security benefits might enable theclient to keep her appreciated assets until she dies,in which case the entire accumulated gains would

The decision to start receivingSocial Security benefits is

necessarily bounded by a separatebut related decision about whether

the client plans to engage in

compensated employment afterdoing so, and to what extent.

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be excused from incurring any income tax, via theso-called step-up-in-basis rule that applies to assetsheld at a persons death.47

Investment Strategy

Some clients might start receiving Social Securitybenefits, even if they do not need these funds tolive on, in order to take the money and invest itelsewhere for a higher anticipated rate of return.The economics of Social Securitys early retirementpenalty and delayed retirement credits, however,suggests that the break-even point in this strategyis about 6.7 percent toeight percent, dependingupon whether the clientin question has reached

full retirement age.48 This result, moreover, mustbe obtained on at least a partially after-tax basis,depending upon which tier of taxation of Social Se-curity benefits applies to the specific client. Further,the relevant increase in Social Security benefits ismandated by federal statute,49 so the economicallyappropriate comparison must be to investmentswith zero risk. As a result, if the client plans to in-vest his Social Security benefits in bank certificatesof deposit, money market funds, or U.S. Treasuryobligations, it is extremely unlikely that the yieldon those financial instrumentsall of which arefully taxable as ordinary incomewill exceed theavailable increase in Social Security benefits. Only

if that person contemplates much riskier investmentswill the strategy of take-the-benefits-and-invest-elsewhere work out economically.

Conclusion

When to begin receiving Social Security retirementbenefits is a surprisingly layered determination. Thebig picture is that currently, more than three out offour Americans start their benefits before reachingfull retirement age.50 But any specific individual mustconsider a range of very distinct factors, especially if

there is the possibility of asurviving spouse or futureemployment some day.Social Security should bethought of as an inflation-indexed lifetime annuity

that must be integrated into the totality of a clientsfinancial circumstances, including other assetswhether in retirement-oriented savings vehicles orotherwiseand other potential sources of retirementincome. Ultimately, what counts is not whether a cli-ent obtains the hypothetical maximum possible dollarsfrom Social Security; after all, such a calculation neces-sarily depends upon extremely accurate estimationsof annual after-tax investment returns andactual lifeexpectancy.51 The real issue is whether a persons So-cial Security benefits have been coordinated with hisor her other resources to best meet all of that personsobjectives. The array of options that Social Securitypresents makes that task challenging indeed.

ENDNOTES

1 See Richard L. Kaplan, The Security ofSocial Security Benefits and the PresidentsProposal, ELDERLAW REP., April 2005, at 1,available at http://papers.ssrn.com/sol3/pa-pers.cfm?abstract_id=700323 ; seegenerallyRichard L. Kaplan, Top Ten Myths of SocialSecurity, 3 ELDER L.J. 191, 19899 (1995),available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1087367.

2

42 U.S.C. 402(a)(2)(2000).3 Id. 402(q).4 Id. 416(l)(1).5 Id.6 SeeLawrence A. Frolik and Richard L. Ka-

plan, ELDER LAWINA NUTSHELL p. 290 (4th ed.2006) (explaining the computation formula).The penalty at age 63 would be 20 percent;at age 64, it would be 13.33 percent; and atage 65, it would be 6.67 percent.

7 42 U.S.C. 402(w).8 Id. 402(w)(6)(D).9 Id. 402(l)(2)(A).

10 See id. 415(i).11 See id. 402(q), (w).12 Id. 402(b)(2), (c)(3).13 Supra note 6, at 302-03.14 Soc. Sec. Rul. 64-52, C.B. 196065 at 3.

The worker spouse can suspend receivingSocial Security benefits without terminat-ing the spousal benefit being paid to thatpersons spouse. See Social Securitys

PROGRAM OPERATIONS MANUAL SYSTEM GN02409.100, 02409.110.

15 1 U.S.C. 7 (2000).16 42 U.S.C. 402(e)(2)(A), (f)(3)(A).17 SeePaul Fronstin, Sources of Health Insur-

ance and Characteristics of the Uninsured:Updated Analysis of the March 2006 CurrentPopulation Survey, EMPLOYEE BENEFIT RES. INST.ISSUE BRIEF NO. 307 (May 2007), at 4 (62.7percent of nonelderly have employment-based health insurance, comprising 90percent of those with nonpublic coverage),available at www.ebri.org/pdf/briefspdf/

EBRI_IB_05-20074.pdf.18 See Richard L. Kaplan, Whos Afraid of

Personal Responsibility? Health Savings Ac-counts and the Future of American HealthCare, 36 MCGEORGE L. REV. 535, 541 (2005),available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=805825.

19 See generally Theodore R. Marmor, THEPOLITICSOF MEDICARE (2d. 2000).

20

42 U.S.C. 1395c (2000).21 Id. 403(b)(1), (f).22 Id. 403(f)(3). During the calendar year in

which a person reaches full retirement age,this test is applied on a monthly basis, andbenefits are reduced by $1 for every $3above the applicable threshold, which in2008 is $3,010.

23 Social Security Administration, Table ofAutomatic Increases, available at www.ssa.gov/OACT/COLA/autoAdj.html.

24 SeeCode Sec. 1(c).25 Code Secs. 3101(a), (b)(6), 3111(a), (b)(6).


The most significant economic factoris probably the cost of health care.

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26 Code Sec. 1401(a), (b).27 Income of $21,560-standard deduction of

$5,450-personal exemption of $3,500 =taxable income of $12,610. To reach the 25percent tax bracket in 2008, taxable incomemust exceed $32,550, which requires ad-ditional income of $19,940.

28 42 U.S.C. 403(f)(3).29 Id. 415(b)(2)(A)(i), (B)(iii); seealso Avram

L. Sacks, 2006 SOCIAL SECURITY EXPLAINED 233(2006); William P. Streng and Mickey R.Davis, RETIREMENT PLANNING: TAXAND FINANCIALSTRATEGIES 24.04[4][a], at 24-18 (2d ed.2001).

30 Social Security Administration, Table ofAutomatic Increases, available at www.ssa.gov/OACT/COLA/autoAdj.html.

31 42 U.S.C. 415(a)(1)(A) (2000).32 Supra note 6, at 29495 (illustrating compu-

tation of Social Security monthly benefit).33 Social Security Administration, Table of

Automatic Increases, available at www.ssa.gov/OACT/COLA/autoAdj.html.

34 Code Secs. 61(a)(11), 402(a).35 Code Sec. 408A(d)(1), (2)(B).36 Code Sec. 86(b)(1)(A)(i), (2).37 Code Sec. 86(b)(2)(B).38 Code Sec. 103(a).39 Supra note 6, at 31720 (illustrating the

computations involved).40 Code Sec. 86(b)(1)(A), (c)(1)(A), (B).41 Code Sec. 86(a)(1), (2), (c)(2).42 Code Sec. 86(a)(2), (c)(2)(A), (B).43 David Baer, State Taxation of Social Security

and Pensions in 2006, AARP ISSUE BRIEF 55(Nov. 2007), at 45, 810, available at http://assets.aarp.org/rgcenter/econ/ib84_taxation.pdf.

44 Code Secs. 1(h)(1)(B),(C), 1221(a) (definitionof a capital asset).

45 Code Sec. 1(a)-(d).46 Code Sec. 121(b).47 Code Sec. 1014(a)(1).48 Supra note 6, at 290, 292.49 See42 U.S.C. 402(q), (w).50 Authors calculations derived from the

latest Social Security Annual StatisticalSupplement (2006), at 6.12, availableat www.ssa.gov/policy/docs/statcomps/supplement/2006/6b.pdf.

51 See, e.g., Mimi Lord, Choosing Early orNormal-Age Social Security Benefits: Factorsto Consider, J. RETIREMENT PLAN., JulyAug.2002, at 37, 3839; Matthew A. McGrath,Evaluating the Commencement of SocialSecurity Benefits, J. RETIREMENT PLAN., Sept.Oct. 2000, at 27.

ENDNOTES

This article is reprinted with the publishers permission from the JOURNALOF RETIREMENTPLANNING, a bi-monthly journal published by CCH, a Wolters Kluwer business. Copyingor distribution without the publishers permission is prohibited. To subscribe to the JOUR-NALOF RETIREMENT PLANNING or other CCH Journals please call 800-449-8114 or visit www.CCHGroup.com. All views expressed in the articles and columns are those of the author

and not necessarily those of CCH.

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a guide to starting social security benefits

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