Would you turn down $100,000 if someone offered you that sum?
You might be doing just that if you make the wrong choices regarding your Social Security.
A recent report by the financial planning firm United Income found that very few seniors are making the optimal financial decisions about Social Security and are losing out on more than $100,000 per household as a result. The average Social Security Recipient would receive nine percent more in retirement income if they made the right decisions.
Retirees have three options for collecting Social Security:
- Taking benefits at any point between turning 62 and their retirement age
- Waiting until retirement age
- Delaying benefits until they turn 70
If you choose the first option, your benefits will be reduced, as you will be collecting them for longer. If you delay taking retirement – depending on when you were born – your benefit will increase by 6 to 8 percent for each year you delay, along with any cost-of-living increases.
But the United Income report found many retirees were taking their benefits too early and that more than half of retirees could build more wealth by waiting until 70 to claim Social Security.
Nearly three quarters, however, claim benefits before their full retirement age, something the report says is optimal only for a small fraction of retirees.
This adds up to significant losses, with retirees losing a collective $3.4 trillion in potential income. The report also says that poverty among the elderly could be halved if retirees waited to claim benefits. Many people may not know that collecting benefits before full retirement age means a permanent reduction in benefits.
The authors of the report argue a change in policy is necessary to get retirees to wait to claim benefits. They say early claims should be the exception, only for those with a demonstrable need to collect early. They also recommend renaming “early retirement,” calling it “minimum benefit age” instead.
Are you planning your financial future and not sure what questions you should be asking. Gummer Elder Law can help. From estate planning to Medicaid asset protection, we can help you make sure you’re making the right financial steps.