More than half of seniors file early for benefits.
Some people may find it necessary to file for Social Security because of circumstances, such as a job loss. However, it is really important to make sure you are making your decisions based on facts rather then myths, according to the Washington Post in “Don’t believe these Social Security myths“.
Some people have no choice and must take their benefits early because they’ve lost their job and have no savings. Others have better options, but they aren’t aware of them. That’s because of the many myths about Social Security. A survey found that while 77% of Americans thought they were pretty smart about Social Security, 95% couldn’t answer eight basic questions about the program.
Let’s look at these myths.
- It doesn’t matter when I take Social Security. Benefits increase by about 7% every year from age 62 to your full retirement age, and then by 8% each year between full retirement age and 70. This is a planned adjustment to ensure that people who opt for a larger check for a shorter period don’t receive more than those who file earlier and receive smaller checks. It’s better to delay, both for the larger check and the benefits that the surviving spouse receives. People who live longer can run out of savings, so having a larger check in your 90s could make a huge difference.
- If I don’t expect to live a long time, I should claim benefits early. Most of us underestimate our life span. A 65-year-old man today can expect to live to 84, and a 65-year old woman can expect to live to 86.5. Life expectancies are even longer for those in their mid-50s. However, here’s the thing: even if one spouse doesn’t live as long, by taking Social Security earlier, their spouse will have a smaller benefit. Married couples lose one of their checks when the first spouse dies, causing a big drop in income. The survivor receives the larger of the two checks the couple was receiving. Therefore, the higher earner in a couple whose check will be larger should delay taking benefits, if at all possible, to benefit the surviving spouse.
- I can claim benefits early and invest the money to come out ahead. No investment today offers a guaranteed return as high as what can be obtained from delaying benefits. You’d have to take a lot of risk to get close to the 7% or 8% guaranteed by Social Security.
- As soon as I stop working, I have to file for Social Security benefits. Not true. You don’t have to file for Social Security benefits until you want to. Even delaying four years, from 62 to 66, can translate into a sustainable 33% increase in your standard of living.
- I better apply before Social Security runs out of money and closes down. This myth becomes more widespread every year. If Congress doesn’t act, which is unlikely, by 2035, the system will still be able to make payments, although they may be curtailed by 20%. Eighty percent of your Social Security check is not zero. It’s more than likely that Congress will address Social Security fixes.
Reference: Washington Post (June 10, 2019) “Don’t believe these Social Security myths”
