How much does claiming Social Security too
early cost you? More than $100,000.
Retirees will lose an average of $111,000 in
income per household because they took Social Security benefits too early into
their retirement, rather than draw down on their own savings first, according
to a new study released Friday from
United Income, a technology wealth management company. At the end of
their lives, they will have $68,000 less in estimated wealth because they
claimed at the wrong age.
Overall, only 4% of retirees took Social
Security at the financially optimal age, which, for 83.4% of them, was age
67 or older. The best age depends on a host of factors, including life
expectancy, other income sources, future costs in retirement and if you're
married or still working.
Simply claiming Social Security at the best
age could also make retirement a reality for many seniors who may not be able
to afford it otherwise, the study found. The findings come as many Americans
struggle to plan and save adequately for retirement.
“For those who are low income, the impact is
greater,” says Matt Fellowes, CEO of United Income and former fellow at
the think tank Brookings Institution where he researched consumer finance
in relation to poverty. “This speaks right to the core of why this program was
created in the first place.”
When to take Social Security?
Social Security makes up about a third of the
annual income that retirees receive, according to the Social Security Administration. The
amount retirees receive each month increases if they wait longer to enroll in
the government administered retirement program.
About 57% of retirees would get the biggest
boost financially if they waited to take benefits until 70 – the age that only
4% of retirees currently claim, the study found. Only 6.5% of retirees would be
better off financially if they claimed before turning 64 –when seven in 10
retirees currently claim.
One in four of those at risk of not affording
retirement or having enough income to cover their expected costs would have
better chance of retiring if they claimed Social Security at the optimal age.
Poverty among elderly people also would be cut by almost half if all
retirees claimed at the best time, the study found.
“It’s a really big penalty those folks on the
edge are making,” Fellowes says.
The reason many retirees don’t wait is simply
fear, says Fellowes. Older Americans become more pessimistic about the economy
and stock market, and it makes them anxious to draw down on the nut they
accumulated over decades in their retirement accounts. Instead, they claim
Social Security early.
How to claim Social Security at best time
Another obstacle is calculating the optimal
age. Many factors contribute to this, so the right answer varies across and,
even within, households, the study found.
For instance, 71% of primary wage earners have
the best chance of affording retirement if they enroll in Social Security at
70. But that percentage falls by half for the spouses of the breadwinner.
Fortunately, there are general rules of thumb
that will get you close to your best claim age, Fellowes says. He
recommends using these three rules to help guide you in getting more – if
not the optimal amount – from Social Security:
·
Nearly no one is
better off claiming before 65.
·
Nearly everyone is
better off claiming between 67 and 70.
·
If you’re married, the
person who earned the most should wait until 69 or 70. The person who made less
can claim at 66 or 67.
“Outside of these rules, it’s basically
impossible to do on your own,” he says. “It’s incredibly hard to make right
decision.”
https://www.usatoday.com/story/money/2019/06/28/social-security-claim-too-early-and-lose-100-000-retirement/1572620001/?utm_campaign=Social%20Media&utm_content=95291655&utm_medium=social&utm_source=linkedin&hss_channel=lis-3Y7QQ-FCpa
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