When is the best time to start collecting Social Security?

Q: Should I start taking Social Security reduced payments in two years when I turn 62, or wait until 66 for the full amount? Someone once told me, "never let the government be your banker," so I'm leaning toward taking the smaller amount at 62 and investing it all, while I'm still working and don't need it.
D.H., via e-mail

A: If you have access to the Internet, jump on the Social Security Administration's website (www.ssa.gov) and go to its "quick calculator," which shows the amount of money you'd receive at age 62 versus age 65 and 10 months (your normal retirement age). It shows your break-even age to be 75 years and nine months.

In its Publication 590, the IRS expects you to live 85.2 years, which hypothetically means you'll collect partial benefits for 23.2 years or full benefits for 20 years.

If you need the money now you should take it, says San Francisco financial adviser Bruce Stuart. But "it would seem that you are better served to wait."

Why? Because you'll need a steel will to invest that money rather than spend it. And at this point in time, when just about every investment is losing ground or only breaking even, what are the chances you won't lose money?

Q: My father recently passed away without a will. He designated my sister and me as beneficiaries to his savings account. After paying his last expenses and selling his mobile home, his remaining money was divided equally among his four children. How do we report this on our income taxes?
A.M., Mountain View, Calif.

A: Not to quibble, but while there may be inheritance or estate taxes, income taxes don't come into play on estates. You may have estate-tax issues, says Nathan Oestreich, a professor of accounting at San Diego State University. But they don't kick in unless the value of your father's estate surpassed $1 million in 2002.

As for your father's savings account, that money belongs to you and your sister. Divvying it up among your other two siblings brings into play tax rules on gifts. By law, anyone can give anyone else $11,000 tax-free per year. If you were under that amount, then you're in good shape tax-wise.:

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