I know, I know, this isn't what you clicked on, but PLEASE do not bypass this article on your way to "When Should I start Taking My Social Security?" or "When Should I Start Taking Money Out of My IRA/401(k), or 403(b). This is a really important issue, and it appears that MILLIONS of people are making bad decisions on these issues based on the feelings I am about to describe. I have concluded this after years of talking to people about “accessing” their money. If you are anything like my clients and acquaintances, let me try to crawl inside your head and tell you what I think you're thinking. I'll tell you what. If after reading the next paragraph, it turns out that I'm wrong, here are the links to get you where you wanted to go:

• When should I start taking money out of my IRA/401(k)/403(b) plan?
• When should I begin to take my social security?

You’ve worked hard all your life, and you’ve set aside money all along the way, both voluntarily (IRA, 401(k), etc.) and involuntarily (social security), and by God, you’d like to enjoy some of it. You’d like to open up the vault where all that money resides, toss it up in the air, and let it float down over you, with the promise and expectation that IT will care for YOU now, and never run out.

My financial planning partner and I used to joke that we should have a room where people could “visit” their money and experience it that way. Because there is a strong psychological desire to do have it FEEL that available to you.

I first come in contact with this phenomenon years ago when I had two clients, a blue collar married couple, New England “Yankees” through and through. Their big nights out each week were their weekly dinners at the Grange Hall and their bowling night. With their modest tastes, and with grown children, they EASILY lived on their two incomes. She was a secretary and he painted boats at the local boat yard. They called me because the wife had come into an inheritance of about $250,000 in stock. This was a princely sum in the 1970s, when their house was probably worth $40,000.

I had been recommended to them by one of their relatives, and I relished the prospect of the chance to invest what was likely to be their long term financial security/retirement money for years to come. … except it never worked out that way. I expected that this couple, as good Yankees, would be very conservative and have an inherent distrust of almost every type of investment vehicle, except maybe some conservative stocks and U S Treasury bonds. But we never even got that far. I helped them handle the sale of their inherited stock, and guided them through the tax ramifications. But when it came time to reinvest the windfall, I was stonewalled at every turn. They put almost all of the money right into the local bank at 3%, and turned up their noses at the 5% I could have gotten them on medium term CDs or Treasury bonds.

“What if we want to take a trip around the world? Or buy a new car?” Mrs. Yankee would say as justification for keeping over $200,000 perpetually available to them, dismissing the additional $4,000 per year (also a princely sum in the 1970s) as somehow unreal.

So I do not in any way dismiss the strong desire people have to be able “get at” their money at all times. I feel it myself. In the case of social security, this usually manifests itself in the following combination of rationalizations:

“It’s my money, I’ve paid all these years into that trust fund.”
“I want to start getting some of my money back while I can still enjoy it.”
“I want to start getting some of my money back before social security goes under.”

At the risk of becoming the ultimate killjoy, I feel I must inform you of some fatal flaws in these rationalizations:

1. There is no trust fund in the sense that you mean it. It was spent, and not too wisely in many cases, by Congress every year as it came in. Your money is gone. Get over it. I don’t like it any more than you do. When you cut through the Congressional Budget sleight of hand, social security is a “pay as you go” transfer program from current workers to current “seniors.” However, the good news is that it’s not going anywhere. It will no doubt have to modified to our detriment over the next decade or two because there are so many of us, but it will be there. (I wrote on the generation warfare aspect of this topic in an article called "We Can’t Let This Happen” on the Platinum Blog on December 20, 2007.

2. Social security is not “going under,” at least any more than you might say it already is. And it can’t “go bankrupt” either. Those terms just do not apply to a government entitlement program any more, I suppose, than “trust fund” does. Because the ultimate “promise” here is from our federal government, the owner of the currency printing press. So the promised benefits will be paid, even if our government has to “print” the money to do so. The risk then becomes inflation, but that topic is for another day.

I feelI needed to bring this up because I hear this type of emotional reasoning so often. There are good reasons to take social security early, and they are included in the articles. But PLEASE do not make serious financial decisions based on the types of emotions and rationalizations I describe here. Because making financial decisions based on emotion leaves you like Mr. and Mrs. Yankee? The never took a trip to anywhere that I know of. I think they bought a stripped down new car once before they died, while annually giving up enough lost interest to have kept them perpetually in a brand new Porsche or Mercedez Benz.

They didn’t listen to some good financial advice, going with their emotions instead. But there’s still time for you… Thanks for listening... now proceed to your original destination with my blessing :-)

• When should I start taking money out of my IRA/401(k)/403(b) plan?
• When should I begin to take my social security?