By Glenn Ruffenach
On Friday, the Social Security and Medicare Board of Trustees issued its annual assessment of the health of the two entitlement programs, and the outlook was bleak: Both programs are running out of money faster than they had previously projected. (We’ll talk more about this tomorrow.) And it’s got many people wondering: Am I handling my Social Security benefits right?
Many people, of course, are worried about Social Security’s long-term prospects. In its annual “retirement confidence” survey published in March, the Employee Benefit Research Institute in Washington found that almost four in 10 workers (39%) are “not at all confident” that future Social Security benefits will match or exceed the value of today’s benefits. And more than three-quarters of workers (76%) are concerned that the age at which they will become eligible for benefits will increase before they retire.
Such fears appear to be prompting even more workers than normal to claim benefits at age 62, the earliest age allowed. (About half of all workers do so.) Filing for Social Security at 62, however, means your monthly payout will be reduced 25% – permanently – from what it would be at your full retirement age. (And down the road, when the full retirement age hits 67, the reduction will amount to 30%.) Given that many of us will be celebrating birthdays well into our 80s and 90s, grabbing Social Security early – without calculating how you (and a spouse) might be able to maximize benefits – could cost you tens of thousands of dollars in later life.
The good news: Help is available. Start with the “Social Security Claiming Guide,” published by the Center for Retirement Research at Boston College. This 24-page look at (in the center’s words) “your most important financial decision” starts with a discussion of how much income you might need in retirement. The guide then reviews how much money you can collect from Social Security and provides answers to frequently asked questions.
Yes, there’s a distinct bent – namely, the longer you wait to claim benefits the better. (When, in fact, you might have some perfectly good reasons for jumping in the pool at age 62, such as poor health.) Overall, though, the guide offers a good introduction to the issues that should go into your claiming decision.
Next, try the National Academy of Social Insurance and its “When to Take Social Security Benefits: Questions to Consider.” Here, the academy, a nonprofit research and educational group, uses a question-and-answer format to guide you through key issues.
Finally, if you’re looking for more personal help, some firms – for a fee – will walk you through specific claiming strategies. For example, Social Security Solutions offers two services. Its “Social Security Snapshot,” which is free, runs your numbers through three typical claiming situations. The company’s “Social Security Strategy Analyzer” – for $125 – runs multiple scenarios, recommends a best course of action in a report, and gives you a one-hour session with a retirement specialist to discuss the report and ask questions.