HomeSocial SecurityAmerican's Make a Fundamental Mistake Regarding Social Security

American’s Make a Fundamental Mistake Regarding Social Security

A Nationwide survey reveals that about 45% of Americans either believe that their Social Security benefits will increase automatically once they reach full retirement age (FRA) or aren’t sure whether their benefits will increase.

This is how it works. Retirement benefits can start at age 62, but each senior has an FRA based on when they were born. If you turn 66 this year, your full retirement age could be as early as 66 and four months. However, for those born in 1960 or later, it might be as late as 67.

Those who begin receiving their retirement check before their own full retirement age will be hit with early retirement penalties. As a result, each senior is entitled to a reduced standard benefit at the FRA. As a result of early filing penalties, a person’s monthly income could be cut by up to 30% if they file at 62 before FRA begins running checks. This is where there is a big misunderstanding. Almost half of all workers believe that their reduced benefits won’t last if they take a hit from an early claim. The Motley Fool, 45% of people think Social Security will boost their check once they reach their FRA. This is simply not true.

The following are some reasons why Social Security mistakes can be so damaging

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It is a huge mistake for seniors to assume that a reduction of benefits due to early filing is temporary, as this may result in seniors having far less money available for retirement than they expected. Imagine claiming benefits in advance, starting at 62 when your full retirement age is not until 67, although you would be eligible for a $1,600 standard benefit when you reach full retirement age. You would lose $480 per month, or $5,760 per year if you had 30% of your benefits reduced due to early filing penalties. Your monthly income would be $1,120 instead of $1,120 and you would earn just $1,120.

Considering that you assume you’ll give up those funds until you’re 67, you shouldn’t worry too much about a “temporary” decline in income — especially if money will be coming in right away. Once you realize that your benefits will be reduced for life, things change. Assuming that you live until 85, you will sacrifice around $103,680 in income if you wait to claim benefits until age 85. Now, that’s a substantial amount of money.
By starting at 62 instead of 67, you would have received benefits for an extra five years. In contrast, the same retirement benefits amount to just $67,200 after five years. You claim and take full benefits from 67 to 85 rather than you receiving $36,480 less over your lifetime.

During some instances, it makes sense to start benefits at 62 — especially if your health is poor and you don’t expect to live long. Nevertheless, you should make a fully informed decision before taking this step. In retirement, you don’t want to start receiving checks too soon since you assume the cut to benefits is temporary, only to discover later that your payments will be less than they could have been for the remainder of your retirement years.

NATE GARTRELL is an author at, a publication in the East County region of San Diego County. He has been writing for the Gazette since 2012 and writes on many different topics including politics, business, health care and more.
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