Age 61 1/2 and Laid Off

Jan,

I am 61 ½ years old and just received notice that I will be laid off on December 30, 2009. I believe that the Social Security Administration averages the last few years of your employment in order to determine your monthly benefit. For the past 3 years I have made about $77,000 and I am worried that if I find a new position it will not pay that much and if I wait until I am 66 ½ to retire my monthly benefit will be reduced substantially. Should I retire now while my income is high and work part time to supplement my income or take a lower paying job? I currently have roughly $220,000 in all of my retirement accounts. Thanks for your opinion.

Coy from Mineral Springs, NC


Coy: You are facing a difficult decision. According to the Social Security rules, your social security benefits are actually based on your lifetime earnings. Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most money. They then apply a formula to those earnings to arrive at your basic benefit, and that is the amount you would receive at full retirement age. There is a worksheet on line at www.socialsecurity.gov to help you determine your benefit amount. This means if you continue working past age 62, the additional earnings could actually increase your benefit.

I encourage you to talk with a financial advisor about your retirement accounts to determine how best to invest those funds for your retirement needs. There are some excellent variable annuities with lifetime income guarantees you can consider. If you don't currently have a financial advisor, I suggest contacting a local bank or brokerage firm and ask to speak with a retirement specialist. The financial advisor can assist you in determining whether you currently have sufficient funds to go ahead and retire or whether you may want to continue to work a few additional years so you will have the money to do what you desire in retirement.

Good Luck!