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Americans Losing Trillions Claiming Social Security at the Wrong Time

Most retirees should wait longer to access their benefits, researchers find. Some should claim them sooner.

Almost all American retirees claim Social Security at the wrong time, a newreport estimates, which means they will miss out on a collective $3.4 trillion in benefits before they die.

While they can tap their benefits as early as age 62, retirees could boost the size of their checks for every year they wait until age 70, when the maximum benefit accrues. The advantage in waiting is substantial: A person eligible for a $725 monthly check at 62 could get a $1,280 check if they wait to start at age 70.

United Income, a money management firm that provides financial advice to retirees, teamed up with former Social Security officials to simulate retiree decisions on when to claim benefits, along with factors that include income, wealth, taxes, health status and longevity. Their analysis, published Friday, found that 96% of retirees choose the wrong year to tap Social Security.

“People are pretty much doing the opposite of what they should be doing,” said Matt Fellowes, founder and chief executive officer of United Income and co-author of the paper.

When to take Social Security is a key decision for America’s elderly, for whom the program has become a critical safety net. About half of older Americans get most of their income from the program.

Unlike investments and other sources of retirement income, Social Security benefits are guaranteed to keep up with inflation and last for life. That’s important when half of all 65-year-old American women can expect to live past age 86, according to Social Security estimates. The average life expectancy for U.S. men who are currently 65 is age 84.

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