Did you know that one single decision could have a huge impact on how much money you receive from Social Security?
An article by The Motley Fool points out that the majority of Americans do not understand the ramifications of claiming Social Security benefits before reaching full retirement age (FRA). It cites a survey by Nationwide Retirement Institute that found about 45 percent of Americans believe their Social Security benefits will go up automatically after they reach FRA. That is NOT true. Claiming early could end up costing you.
Retirees have the option to start collecting benefits as early as age 62, but there are early filing penalties that reduce their benefit amount — which is usually about 30 percent. Many people mistakenly think that once they reach FRA, their benefits will automatically bump up. That’s not how Social Security works. The rule is that if you claim early you are reducing your benefits for life.
The article illustrates that if a person retires at age 62, but their FRA is 67, with the penalty they will miss out on about $5,800 each year. If they were to live to be 85, they would have received about $36,000 less over their lifetime. That’s a big chunk of change and why many retirees try to wait until their reach FRA before they start claiming Social Security benefits.
The Seniors Trust believes Social Security should not be a numbers game. America’s workers earned and deserve their benefits. We want Congress to pass the Social Security Expansion Act. It would increase monthly benefits, establish a fairer cost-of-living adjustment tied to the actual expenses seniors face, and shore up the long-term solvency of Social Security.