On June 27th, nearly 20,000 Americans had the opportunity to learn that the timing of retirement and claiming Social Security benefits can seriously affect their future financial health. That’s how many participants signed-up for a live webinar produced by AARP, featuring Webster Phillips, senior policy analyst at the National Committee to Preserve Social Security and Medicare. Phillips is one of the nation’s foremost experts on Social Security and a 31-year veteran of the Social Security Administration (SSA).
Phillips joined AARP’s host, Kathy Stokes, and longtime SSA staffer Rob Clark for the webinar, entitled, “Social Security – Why It Pays to Wait.” (It’s still available for viewing here.)
The webinar is part of the National Committee’s “Delay and Gain” project to educate the public about the benefits of waiting until normal retirement age to file a Social Security claim. Workers can receive their full retirement benefit amount at age 66 (rising soon to 67), but many choose to claim as early as 62 – meaning they receive a reduced monthly benefit, up to 30% less, for the rest of their lives.
“For many workers, the strong desire to stop working may cloud their decision about when it’s best, financially speaking, to call it quits. This could cause retirees… to lose thousands of dollars of Social Security income over the course of their retirement, putting them in potential financial peril.” – Webster Phillips, NCPSSM, 6/27/19
By the same token, a worker’s permanent monthly benefit increases for every year he/she waits to claim past full retirement age – up to age 70. In fact, beneficiaries can receive up to 44% more in their monthly checks by postponing retirement until then. As an added advantage, their annual cost of living adjustments (COLAs) will be based on the higher benefit amount.
“Life expectancy is much longer now than it was when Social Security was created. Seniors of today must survive on their fixed incomes even longer.” – Webster Phillips, NCPSSM, 6/27/19
The day after the webinar, Bloomberg reported on a new study which found that American retirees “will collectively lose $3.4 trillion in potential income that they could spend during their retirement because they claimed Social Security at a financially sub-optimal time.”
To illustrate the stakes for individual workers more clearly, the webinar included a video presentation featuring two fictitious twin brothers, Tony and Victor, who claim Social Security at different ages. Each brother has earned a $1,600 monthly benefit at full retirement age. Tony claims early, at 62, lowering his permanent Social Security check to $1,200 per month. Victor, on the other hand, waits until age 70, increasing his monthly benefit to $2,100. With the extra income, Victor can not only pay his bills, but visit his grandchildren who live out-of-town.
During the webinar, Phillips re-iterated an important caveat in the “Delay and Gain” project, which is that not everyone is able to postpone retirement. Failing health, physical limitations, lack of employment opportunities, and caregiving responsibilities are some of the factors that can make it difficult to wait to file for Social Security, Phillips explained. “But for people who are able to continue working until at least their full retirement age, if not longer, it pays to wait.”