Social Security mistake could make Americans lose $182,370

A recent study has found that retirees are missing out on thousands in pension savings due to taking Social Security benefits too early. Research funded by the Federal Reserve Bank of Atlanta determined that retirees will be able to boost their median discretionary spending over a lifetime by around $182,370 if they wait to claim payments until they are 70.

Currently, the full retirement age for when someone can access the entirety of their Social Security benefits is 67.

However, Americans can partially access this support as early as 62, however at a much-reduced rate.

When the typical worker waits until they are 70 to start receiving Social Security, their discretionary spending over a lifetime could be boosted by 10 percent.

This is the equivalent of an extra $182,370 (£147,327.60) for the average worker in America.

The report’s researchers found that nearly 90 percent of workers aged 45 to 62 would benefit by waiting until age 70 to start getting Social Security payments.

Furthermore, the richest 20 percent of U.S. citizens who are currently 45 to 62 years old could increase their lifetime discretionary spending by almost $290,000 (£234,276.50) if they wait to collect until 70.

The top one percent of Americans may be rewarded with a lifetime spending rise of nearly $600,000 (£484,710) if they postpone claiming Social Security benefits.

According to the study, less wealthy Americans, those in the bottom 20 percent of earners, would potentially raise their lifetime discretionary spending by almost $110,000 (£88,863.50).

However, one of the issues raised in the report is that households will likely have to take a financial hit if they were to wait longer for Social Security.

Some 47 percent of families would need to reduce their spending if they were to do this, according to the study.

One of the proposals raised to allow people to claim Social Security benefits early and another part of their support at a later date.

The report concluded: “Social Security is a critically important component of retirement-income security.

“Unfortunately, hundreds of millions of workers are making arguably highly inappropriate collection decisions – decisions that significantly reduce their lifetime Social Security benefits and, consequently, their lifetime spending.

“We find that virtually all U.S. workers aged 45-62 would benefit from waiting until age 65 to collect.

“More than 90 percent would benefit from waiting until age 70. Yet only 10.2 percent do so, given our assumption that retirement-benefit collection begins at retirement. These age decisions are robust to alternate assumed maximum ages of life.

“Even assuming an unrealistically low maximum age of 85, three-quarters of workers would do best by waiting until age 70.”

It should be noted that Americans can access their full Social Security benefit at different ages depending on when they were born.

If someone was born between 1943 and 1954, their full retirement age for Social Security is 66 years old.

This age threshold rises by two months for every year someone is born between 1955 and 1959.

For those born in 1960 or later, the full retirement age remains at 67 but this could potentially be raised in the years to come.

Source: Read Full Article