According to a recent study from the investment firm Schroders, it was found that 9 out of 10 Americans who work, were planning to retire early and ignore the governments advice to wait until age 70 to start collecting Social Security benefits.
As per many experts, waiting up until age 70 to start claiming benefits will ensure that you receive the maximum out of your benefits. However, even though Americans are aware of this information, they still choose to claim benefits early.
It’s not that people don’t understand the math. Many simply feel they can’t afford to wait.
Why So Many People Claim Early
Americans can begin collecting Social Security benefits at the age of 62 but the Full Retirement Age (FRA) is 67. Should you claim your benefits early, you will receive a reduced check every month. However, if you wait up until age 70, you’ll get up to 76% more each month than if you started at 62.
This is a major difference especially for those living on fixed incomes. Unfortunately, people still choose to collect benefits earlier and this is because of the increasing prices of goods and services.
With the rising costs of the economy, Americans need the extra income to get by. As many people are already struggling to pay daily expenses, waiting a few years is not feasible.
Financial Stress Is a Big Factor
The results from this study show that almost half of the respondents expect to collect benefits as soon as they can.
The reason for this is that the cost of everyday essentials such as food, utilities and medical care has increased significantly over the past few years. It’s rather unfortunate that Americans don’t have enough savings to cover these expenses.
Fear That Social Security Might Run Out
In addition to the above, people are also scared that the program may not be sustained in the future. Recent data shows that the Social Security trust fund is expected to be depleted by 2034 if no changes are made. For this reason, people are concerned that the program could run out of money or even begin reducing payments.
According to over half of respondents to the Schroders study, they don’t think Social Security will still be completely financed when they retire. As a result, many opt to receive lesser checks now rather than risk losing money later.
People are having a hard time waiting because they are losing faith in the system. Instead of waiting for a promise that could alter, many people find it safer to “get what you can, while you can.”
The Hidden Cost of Claiming Too Soon
While claiming early might seem like a smart move in the short term, it can hurt you in the long run.
Claiming at age 62 would result in a 30% decrease in your monthly income, which would be $2,000 at age 67. That’s about $144,000 in lost revenue over 20 years. On the other hand, waiting until you are 70 years old might increase your monthly payment to almost $2,480, which would be a significant difference over time.
Finding the Right Balance
Unfortunately, not everyone can wait up until age 70 to collect benefits. Many people may experience health issues or unforeseen circumstances that make it difficult to delay claiming benefits.
It’s important for beneficiaries to stay informed and updated regarding their Social Security benefits. beneficiaries are also urged to seek assistance from a financial advisor if they need help making decisions. The end goal is a peaceful retirement.
Those who are able to wait until age 70, should do so. For many Americans, the decision isn’t just about maximizing money, it’s about having enough to live comfortably.