90% of Americans plan to skip the No. 1 piece of Social Security advice, study finds
Many Americans Ignore Advice to Delay Social Security Benefits
A recent study conducted by investment firm Schroders revealed that nine out of 10 working Americans are planning to ignore the common financial advice of waiting until age 70 to claim Social Security benefits. This advice is based on the fact that delaying benefits results in higher monthly payments, but it seems that many Americans are opting to claim their benefits earlier.
While Social Security allows individuals to start claiming benefits at age 62, the full retirement age is currently set at 67. Claiming benefits early comes with a tradeoff, as it reduces the monthly payment by about 30%, with these lower benefits continuing for the rest of one’s life. On the other hand, delaying benefits until age 70 can result in a 30% higher monthly payment compared to claiming benefits at age 67.
Despite understanding the trade-offs involved in claiming benefits early, only 10% of respondents in the Schroders survey plan to wait until age 70. The study of 1,500 adults highlighted that 44% expect to file for benefits before reaching full retirement age.
Challenges Faced by Retirees
Deb Boyden, head of U.S. defined contribution at Schroders, pointed out that many retirees are experiencing a shortfall in their retirement savings, leading them to rely on Social Security benefits for immediate expenses upon retiring. The Allianz Center for the Future of Retirement also released a study showing that a significant number of Americans lack knowledge about Social Security and its role in their retirement plans.
Concerns about the future of Social Security, including its financial stability, are prompting many Americans to consider claiming benefits earlier. With Social Security facing a financial crunch and its trust funds projected to become insolvent by 2034, there are fears that benefits may be reduced if changes are not implemented.
Addressing the Retirement Income Gap
Despite the perceived need for $5,032 in monthly income to retire comfortably, current retirees are only generating an average of $3,250 in monthly retirement income. This significant gap underscores the importance of helping individuals plan better for retirement.
Younger working Americans are also facing challenges in saving for retirement, with rising expenses such as housing consuming a larger portion of their income. Experts suggest that lawmakers could strengthen the Social Security program by raising the income cap on Social Security taxes, among other measures.
Overall, the findings from these studies highlight the importance of informed financial planning and decision-making when it comes to claiming Social Security benefits and preparing for retirement.
