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One of the most critical retirement decisions a soon-to-be-retired worker needs to make is when to collect Social Security benefits. Having dependable income as early as possible certainly relieves a lot of the anxiety that can come from losing a regular paycheck, but you shouldn't ignore the huge increase in benefits if you delay collecting Social Security.

The best age to claim Social Security will be based on each person's circumstances. But, in general, delaying Social Security is going to be the better choice. Here are a few reasons why:

The biggest retirement risk is longevity, and delaying Social Security will reduce the risk of running out of money. If you delay Social Security benefits, you will get a bigger check every month. That means more stable income you can count on even if you miscalculate your retirement planning and spend every penny of your savings and investments. Your monthly payments will increase by 7% to 8% for each delayed year, which could have a huge impact on your retirement finances.

Each cost of living adjustment (COLA) will be bigger. Social Security benefits increase by a percentage of the current payout to keep up with the cost of living. If you start collecting a higher amount by delaying your start date, the same percentage COLA increase will have a higher dollar value.

You can minimize the chance of regret. A retiree will generally get a larger lifetime benefit after age 78 by delaying claiming Social Security benefits. This means that if you live past 78, you might wish you hadn't taken benefits early because your lifetime payments will be smaller than if you had delayed claiming. A person who does not live past 78 would have been better off claiming earlier. (This example compares the start of benefits at age 62 and at age 66.)

You can convert your pretax nest egg to a Roth IRA at a lower tax rate. A portion of Social Security payments could be subject to income taxes. By delaying Social Security during the early part of your retirement, the monthly payments will not be included in your adjusted gross income. This means you can convert your pretax nest egg, including a traditional 401k, to a Roth individual retirement account at a low tax rate.

Let's say a couple no longer has regular income because both spouses have retired. Based on 2012 tax brackets, they could convert up to $70,700 of pretax income to a Roth IRA and pay just 15% of that amount in taxes. After that, all investment income derived from that $70,700 throughout their lifetime will be tax-free once the money is in a Roth IRA.

There are some nuances, of course. Roth conversions have the potential to increase your risk of a tax audit. So, it's a good idea to speak with a tax professional before attempting such a move. However, this could be said about anything that adds complexity to your tax return, and making the conversion could be a huge benefit for those who can take advantage of this tax maneuver.

The odds of living longer are increasing. With advancements in medicine and wellness research, many people are living longer. Delaying benefits will likely be the better choice for healthy retirees. While waiting to claim your benefit certainly has costs, it will give you more income in your later years when you are likely to need extra money the most.

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