Most Americans Lose $180,000 in Social Security Benefits Due to Key Mistake: Sudy
According to a recent study, the majority of Americans should delay filing for Social Security benefits until they are at least 70 years old in order to avoid losing out on thousands of dollars.
According to a National Bureau of Economic Research research (pdf), people who get Social Security payments prematurely lose out on an overall sum of more than $180,000. Although individuals can begin receiving Social Security benefits at age 62, the study's authors advise that many should hold off until age 65 or perhaps 70.
The report stated, "We conclude that almost all American employees age 45 to 62 should wait beyond age 65 to collect." "More than 90% should hold off till they are 70. Only 10.2 percent of them seem to accomplish this. For this age group, the present value of lifetime household discretionary spending has a $182,370 median loss.
Several economists and researchers used an analytical technique to discover that "high-income seniors have the most to gain in absolute terms from maximizing their lifetime benefits" and that "Social Security lifetime benefit optimization is a clear means of increasing the welfare of retirees."
The survey stated that low-income pensioners "may enhance their living standards by a significantly higher percentage." "Patience is all that's needed, whether you're wealthy, middle-class, or poor—waiting to apply for the proper benefits at the right time."
They also calculated that, according to "Social Security macroeconomic assumptions," if all Americans "to optimize" their benefits, it would result in an increase of $3.4 trillion in the massive $61.8 trillion unfunded liabilities of Social Security.
However, they emphasized that "another $3 trillion or so may easily be added to this number if we believe that future generations would also optimize." According to the current demographic and economic circumstances, the system's reductions for early retirement and Delayed Retirement Credits are more than actuarially fair.
According to the study, if a Social Security beneficiary waited to take advantage of their benefits, their overall lifetime spending would increase by 10.4%.
"The lifetime spending gain reaches 17% for one in four people. One in ten people see gains greater than 26 percent. The median lifetime expenditure increase for the poorest fifth of 45 to 62-year-olds is 15.9%, with one in four gaining more than 27.4%, it stated.
The Social Security Administration recently announced an increase in the cost of living adjustment of 8.7 percent, the greatest in around 40 years. This is a result of the highest inflation in decades, which peaked in June at 9.1 percent annually.
According to the Social Security Administration last month, the cost-of-living adjustment (COLA) means that starting in January, the typical beneficiary will get more than $140 more per month.
In an interview with The Hill, Nancy Altman, co-director of the nonprofit organization Social Security Works, said: "This is not a benefit hike, it's an adjustment to keep pace with inflation, and of course prices are rising to very high levels right now. However, the COLA is a very crucial component since without it, benefits would gradually disappear.
According to Ken Thomas, national president of the National Active and Retired Federal Employees Association, rising consumer costs and soaring inflation are to blame for the announcement of a sizable increase in 2023. But as Thomas pointed out, "increasing health care expenditures... could lessen the usefulness of this change." More money is spent on healthcare by seniors than by any other group of people.
According to William Arnone, president and chief executive officer of the National Academy of Social Insurance, "the COLA doesn't consider where you live or your real spending patterns." For some, the cost of living disparity between, instance, rural Midwestern towns and major cities like New York, Washington, D.C., or Chicago is exaggerated. Some will profit more" than others from the same-sized rise because many elderly individuals choose to live in suburban or rural locations.
The Social Security system will pay out more money sooner as a result of the anticipated rise, which might put more strain on the trust fund. The Social Security and Medicare Trust Fund will no longer be able to provide full benefits starting in 2035, according to the program's annual trustees report, which was published in June.
Analysts predict that if Congress doesn't act before 2034, Social Security will become insolvent as early as then.
From: Epoch Times