Most Americans lose $180,000 in Social Security benefits due to one key blunder: Study

A new study has revealed that most Americans should wait until they’re 70 or older before they start claiming Social Security benefits or they could lose thousands of dollars.

A study (pdf) by the National Bureau of Economic Research found that when Social Security recipients claim their benefits too soon, they miss out on the opportunity to receive more than $180,000 overall. People are eligible to receive Social Security benefits starting at age 62, though the study authors say many would have to wait until they’re 65 or even 70.

“We find that virtually all American workers between the ages of 45 and 62 would have to wait beyond age 65 to collect,” he said. “More than 90 percent should wait until age 70. Only 10.2 percent appear to do so. The median loss for this age group in the present value of household lifetime discretionary spending is $182,370.

Using an analytical tool, several economists and researchers have found that “optimizing lifetime Social Security benefits represents a clear means of improving the well-being of retirees” and that “high-income retirees have the absolute most to gain maximizing their lifetime benefits”.

“But low-income retirees can raise their living standards by a much higher percentage,” the report said. “Whether rich, middle-class or poor, what is needed is simply patience, waiting to claim the right benefits at the right time.”

They also estimated that under “macroeconomic assumptions of Social Security,” if all Americans were to “optimize” their benefits, that would translate into a “$3.4 trillion increase in the current colossal unfunded debt of $61.8 trillion in Social Security”.

“But if we assume future generations will also optimize, another $3 trillion could easily be added to this figure,” they wrote. “This reflects the fact that the system’s reductions for early retirement and late retirement credits are more than actuarial fair based on current demographic and economic conditions.”

If a Social Security recipient maximized their benefits by waiting to claim them, there would be an overall 10.4 percent increase in typical workers’ lifetime spending, according to the researchers.

“For one in four, the lifetime expense gain exceeds 17%. For one in ten, the gain exceeds 26%. Among the poorest fifth between the ages of 45 and 62, the average increase in spending over a lifetime is 15.9 percent, with one in four earning more than 27.4 percent.

COLA Increase

Several months ago, the Social Security Administration announced an 8.7 percent increase in the cost of living, the highest in nearly 40 years. This is due to decades-high inflation, which reached 9.1% year-on-year in June.

A woman looks at the U.S. Social Security Administration building in Burbank, California on Nov. 5, 2020. (Valerie Macon/AFP via Getty Images)

The cost of living adjustment (COLA) means the average recipient will get more than $140 more a month starting in January, the Social Security Administration reported last month.

“This isn’t an increase in subsidies, it’s an adjustment to keep up with inflation, and obviously prices are going up to very high levels right now,” Nancy Altman, co-director of the organization, told The Hill. nonprofit Social Security Works. an interview. “But COLA is an extremely important feature, because without it the benefits would erode over time.”

The announcement of a steep increase in 2023 is no surprise, according to Ken Thomas, national president of the National Active and Retired Federal Employees Association, due to rising consumer prices and rising inflation. “However, rising health care costs … may reduce the value of this adjustment,” Thomas said. “Older people spend more on health care than any other segment of the population.”

“COLA doesn’t take into account where you live or your actual spending patterns,” said William Arnone, CEO of the National Academy of Social Insurance. “For some people, that’s an exaggeration of the cost of living for, say, small Midwestern cities compared to urban areas like New York, DC or Chicago. With many older people choosing to live in suburban or rural areas, some will benefit more than others from the same increase.

But the projected hike means the Social Security system will pay out more money sooner, which can add more pressure to its trust fund. The annual report of Social Security and Medicare trustees released in June said the program trust fund will not be able to pay for all benefits starting in 2035.

Some analysts estimate that there will be a Social Security default as early as 2034, unless members of Congress take action before then.

Jack Phillips

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Jack Phillips is a New York-based breaking news reporter for The Epoch Times.

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