To some people, Social Security is an arrangement set in stone. You (and your boss) are generally required to pay into the system pre-established amounts, based mostly on your earnings.

That lack of flexibility is also present when you get your benefits in retirement, because once you decide to initiate the payments, what you get is pretty much what you get.

But the "when" of taking your Social Security is up to you, within certain limits. And depending on your situation and longevity, the decision could make or cost you several hundred thousand dollars.

Here's how to determine the right time to take your Social Security payments in retirement.

Taking it sooner

The first age at which most recipients can initiate Social Security is 62, and you wouldn't be human if you weren't at least a little bit tempted to begin getting your money at the earliest possible date.

But your impatience could be expensive in the long run, especially when compared to waiting until "normal retirement age" (it's 66 if you were born from 1943 to 1954, progressing gradually up to 67 if you were born after 1960).

First, your payments will be lowered by 5/9 of 1% for each month prior to reaching full retirement age, up to 36 months. If you take Social Security more than 36 months before NRA, the reduction is 5/12 of 1% for each month over 36, and then 5/9 of 1% for each of the original 36 months.

That means a recipient scheduled to get $2,000 per month as a 66 year-old at normal retirement age would get $1,500 if he instead starts the payments at age 62.

And as an added injury to his income, if he earns any money while receiving the benefits before reaching NRA, he'll lose $1 in benefits for every $2 that his annual earnings exceed a certain amount ($14,160 in 2009, and how can anyone possibly be confused by all this?).

Waiting to take it

The advantage gained by postponing your benefits doesn't stop just because you've reached normal retirement age. For every year past NRA that you wait, your eventual monthly check will grow by 8%.

So the retiree who would get $2,000 per month at an NRA of 66 could get over $2,700 per month if he waits until age 70, which is the longest he could delay his payments.

Live longer and prosper

Sharp-eyed readers will point out that if the above-mentioned retiree waits until age 70 to get the greater monthly check, while waiting he will miss out on 48 monthly payments of at least $2,000, totaling $96,000.

So the question becomes, "How long do I have to live to make it worth my while to wait?" The answer depends on an individual's circumstances, but most scenarios point toward a breakeven age of around 78 or so.

That may seem to be far off in the distant future, but the Center for Disease Control says the average current life expectancy for a 66 year-old American male is about 82, and 85 for his female counterpart.

In which category are you?

Generally, you should take your Social Security payments sooner rather than later if you need the money to survive. Also, it should be considered by those who have poor health, or who have been made poorer by a decline in the stock market.

Delaying payment is probably smarter if you enjoy good health and better genes, don't necessarily need the money, or are still working into your sixties.

If given the choice between working more or retiring and taking Social Security, you're usually better staying on the job as long as you can stand it, as your benefits are based in part on your 35 highest years of earnings.

But whenever you decide to start taking Social Security, there are several strategies you can use to increase the amount you eventually receive.

You'll learn more about them next month. In the meantime, please know that the best way to the get the most from Social Security is to live a long life -- so take good care of yourself.

-- After graduating from the University of Wisconsin with a degree in economics and history in 1988, McKinley became one of the youngest licensed financial advisors in the country. He is now a Certified Financial Planner practitioner, and owner of McKinley Money LLC, a registered investment advisor in Eau Claire, Wisconsin that provides fee-based financial planning and investment management to individuals and families. Read McKinley's complete bio

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