7 of 10 Adults Over Age 50 Get This Wrong About Social Security

My Comments: Social Security has become a critical financial component in the lives of millions of retired people. If you’re not there yet, you must learn the basics or live with the regret.

I think of age 50 as a critical turning point for any adult who thinks they might retire some day. From this point forward, lack of understanding about Social Security and a raft of other variables becomes an existential threat to financial survival in retirement.

Teaching people how to make better financial decisions in order to fully enjoy retirement has become my life’s mission. Check out my online school, Successful Retirement Secrets and watch the free video previews.

by Darla Mercado \ 8 May 2019

When it comes to Social Security, one small mistake can botch a lifetime’s worth of income.

As tempting as it may be to claim your retirement benefit as soon as you’re eligible at age 62, choosing to do so could put a dent in your cash flow.

Few people seem to be aware of this, according to a recent survey by the Nationwide Retirement Institute.

Close to 70% of the polled individuals erroneously identified the age at which they’d be eligible for full retirement benefits from Social Security, the institute found.

On average, participants incorrectly believed that they would be eligible for full benefits at age 63.

A total of 1,315 adults aged 50 or over took the survey online in February.

Another 26% said that if they claimed benefits early, then their benefits would increase once they hit full retirement age.

This is false.

In reality, taking Social Security at 62 can result in a permanent benefits reduction of 25% to 30%.

“The misconceptions around Social Security are alarming,” said Tina Ambrozy, president of sales and distribution at Nationwide. “More than a quarter of participants thought that if they claimed earlier, they’d get a raise.

“That’s not true,” she said.

Popular reasons for tapping income earlier than expected included “needing the money to pay for living expenses,” “supplementing income” and “because they were laid off,” Nationwide found.

“In some cases, people lost their job and they needed the money,” said Ambrozy. “In others, they had to pay for health-care costs.”

About 1 in 10 of those early filers tapped Social Security sooner rather than later because they were worried that the government would reduce or eliminate benefits.

Indeed, the annual trustees report found that the program would only be able to pay about 80% of promised benefits in 2035 unless Congress acts before that.

More than 8 in 10 participants said they believed that the Social Security system needs a change.

Of those individuals, more than half called for a tax increase on high-income households. About as many sought reduced taxation of benefits.

In order to get the Social Security retirement benefit you’re entitled to, you must claim it at your full retirement age.

For individuals born between 1943 and 1954, full retirement age arrives on their 66th birthday.

“Full retirement age” ticks upward for people born in subsequent years, rising to age 67 for individuals born in 1960 or later.

It pays to wait. Retirees who wait until after full retirement age to claim are eligible for delayed retirement credits: an 8% increase to their benefit check for each year they defer, until they turn 70.

Even if you put off taking Social Security, it helps to start strategizing years before you leave work behind for good.

Consult a financial advisor to see how these retirement benefits work alongside your 401(k) plan, individual retirement account and other potential income sources.

“Ages 50 to 55 is about when you should start figuring out to make sure you’ve covered all of your bases,” said Ambrozy.

Source article: https://tinyurl.com/y435sfpy