A recent survey by Schroders reveals that 90% of working Americans intend to disregard critical Social Security advice. This advice encourages individuals to wait until age 70 to claim their benefits, ensuring higher monthly payments. The findings raise concerns about financial preparedness among the population.
Understanding Social Security Benefits
Social Security allows individuals to start claiming benefits at age 62, which is earlier than the current full retirement age of 67. However, opting for early withdrawal reduces monthly payments by approximately 30%. These lower benefits remain for the claimant’s lifetime.
In contrast, delaying benefits until age 70 increases monthly payouts by about 30% compared with claiming at age 67. Financial experts often suggest waiting to maximize retirement income. Research indicates that claiming early could cost retirees up to $182,000 over their lifetime.
Survey Insights
In the survey conducted with 1,500 adults, only 10% planned to wait until age 70 to claim benefits. Conversely, 44% anticipated filing for benefits before reaching full retirement age. Deb Boyden, head of U.S. defined contribution at Schroders, stated that most Americans understand the implications of early claims but are unwilling to wait.
- 70% of respondents are aware that postponing benefits leads to more income.
- Many face financial pressures that necessitate immediate Social Security income upon retirement.
Financial Preparedness and Social Security Knowledge
Another study from the Allianz Center for the Future of Retirement highlighted that many Americans lack knowledge about Social Security. About 20% mistakenly believe that Social Security will fully fund their retirement, though it typically replaces only 40% of a worker’s pre-retirement wages.
Concerns about the program’s future also contribute to the decision to claim benefits early. The Social Security program is facing funding challenges, with its payments surpassing contributions. If no changes are made, trustees predict insolvency of the trust funds by 2034. However, benefits would continue at a reduced rate of around 20% once the trust funds are depleted.
Potential Solutions
To address the financial crunch, experts suggest measures such as raising the income cap on Social Security taxes, currently set at $176,100. Earnings above this threshold are exempt from payroll taxes that fund the program.
Presently, non-retired Americans believe they need about $5,032 per month to retire comfortably. In contrast, current retirees average only $3,250 each month. This financial gap highlights the urgent need for better retirement planning among workers.
Furthermore, a Goldman Sachs analysis found that three-quarters of younger working Americans struggle with retirement savings. Rising basic living costs, particularly housing, consume a larger share of their income than in previous generations.
