What Social Security Fails To Tell You Can Cost You Dearly
TSCL hears from people every day about the adequacy of their benefits. People who began collecting benefits at 62 frequently tell us they were unaware of the financial consequences of their decision, and were not informed by employees of the Social Security Administration that their benefits would have grown by 8% annually between ages 66 through 70. Had they received better information about their benefit options, many of them might be in a different financial situation today.
The vast majority of the public doesn’t know much about their Social Security benefits. A study by the Government Accountability Office (GAO) has found that Social Security often fails to give out key information for making the best retirement decisions. The lack of full discussion has lifelong consequences for millions of retirees who are giving up tens, even hundreds, of thousands in retirement income when they retire before age 70.
The majority of older Americans retire as soon as they became eligible at age 62, despite permanent reductions. A 2015 report from the Centers for Retirement Research at Boston College found that about 45% of retirees started benefits at 62 when their benefits are reduced 25%. But in order for people to maintain their standard of living in retirement, people close to retirement age need to understand that they will give up tens of thousands of dollars in Social Security income by taking benefits too soon.
TSCL recently submitted a statement for the record to the Senate Special Committee on Aging recommending a number of critically needed improvements:
- SSA should provide lifetime income benefit estimates for different claiming ages on benefits statements.
- SSA should include details about spousal and survivors benefits on personal benefits statements. In many cases, the spousal and survivors benefits that individuals are entitled to are larger than those that they earned with their own work histories.
- SSA should consider notifying individuals that Social Security benefits are calculated using the 35 years of highest earnings. For many workers earnings are highest right before retirement. When people file for benefits at age 62, not only are they sacrificing the 8 percent annual growth in benefits after age 66, but they are also missing out on the higher benefits that additional years of high earnings would bring.
If you are under age 66 and haven’t started benefits, don’t let part of your Social Security go to waste. Keep working and saving until age 70 if you can. The added income will keep your retirement a little more comfortable, and if you pass away before your spouse, you will leave a higher survivors benefit.