June 22, 2024

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More Americans Think They Can Retire With Less Money by Claiming Social Security Early, But Are They Right?

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More Workers Plan to Retire on Less Money by Claiming Social Security Early

Hammered by inflation, recession fears and doubts about the future of Social Security, an increasing number of working Americans say they plan to claim their Social Security benefits early while staying on the job. Here are the factors driving this trend and the pros and cons of following suit.

Consider working with a financial advisor to create a retirement plan that fits your goals, risk profile and timeline.

More People Claim Social Security Early

42% of Americans said they plan to file for Social Security before their full retirement age while also continuing to work, according to a 2022 survey by the Nationwide Retirement Institute – up from 36% in 2021.

Workers who’ve paid into the retirement system can claim their Social Security benefits as early as age 62, but that decision can result in a monthly benefit check that’s as much as 30% less than the payment they’d receive at full retirement age, which is between ages 66 and 67 depending on what year you were born. By waiting beyond longer to file, a retiree can increase their Social Security payment by 8% each year beyond the full retirement age they wait to file, topping out at 70 years.

As of February 2023, the average monthly Social Security check among all retirees is $1,693.88, according to the agency. Meanwhile, the average check for a 62-year-old retiring this year would be $1,247.40, while the average payment at the full retirement age of 67 would be $1,782.

Over a 20-year retirement, the monthly difference of $534.6 would add up to more than $128,000 in retirement income, not counting any cost-of-living increases. These adjustments increase benefits by a set percentage calculated each year to keep retirement income paced with inflation.

Collecting benefits early isn’t always wrong, planners note. Many workers start taking Social Security benefits when they’re forced to retire because of corporate downsizing, age…

2023-11-12 10:59:22

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