Most Americans are claiming their Social Security benefits too soon and fewer than one in 10 retirees postpone claiming these benefits long enough in order to maximize their retirement funds, according to a new report by the Government Accountability Office (GAO).
The common age for Americans to tap into their retirement benefits is 62. However, by claiming their Social Security at this age they are out 25 percent than if they had waited until their full retirement age, which is 66 years old.
Also, lower- and middle-income workers are likelier to access Social Security at an earlier age because they have inadequate savings for their retirement years, though they would benefit by receiving Social Security at the regular retirement age.
Some other reasons as to why a person might claim eligibility earlier is because of health issues, unemployment or underemployment, being a widow, being uneducated or a family history of shorter life expectancies.
The GAO posted an example: a blue-collar employee at the ages 60 to 62 is 55 percent likelier to claim their Social Security benefit early. Thirty-eight percent were more likely to file for Social Security if they worked at least 35 years on the job by the time they reached the ages of 60 to 62.
On the other side of the coin, meanwhile, managerial and professional workers who hit the ages of 60 to 62 were more likely to delay their retirement benefits.
AARP senior strategic adviser Sara Rix noted in a statement that not everyone has a choice as to when they can take their retirement benefits because for a lot of people it can replace a higher percentage of their pre-retirement earnings for low-wage workers.
“For many workers—especially the unemployed and those in physically demanding jobs—Social Security is a lifeline, a guaranteed source of inflation-protection income that they can count on until they die. And their spouses can count on it as well,” said Rix. “That is what early benefits are for.”
According to the GAO report, a growing number of people are delaying taking their Social Security. For instance, 43 percent of men and 49 percent of women born in 1935 claimed retirement benefits at 62, but 32 percent of men and 38 percent of women born in 1946 did the same thing.
Although the report did not mention it, perhaps another reason why many take their retirement benefits out early is because they fear that Social Security might become insolvent. It was reported last year that Medicare will reach insolvency by 2026 and Social Security’s two trust funds will become bankrupt by 2033.
“Lawmakers should address the financial challenges facing Social Security and Medicare as soon as possible,” the trustees report said last summer. “Taking action sooner rather than later will leave more options and more time available to phase in changes to that the public has adequate time to prepare.”
The Heritage Foundation notes that once insolvency occurs without any bailouts then across-the-board Social Security benefit cuts of approximately 23 percent could occur – Social Security faces a $9.6 trillion in unfunded liabilities over the next 75 years, up from $1 trillion from a year ago.
