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The 1 Thing Americans Get Right About Social Security (and 4 Things They Get Wrong)

May 03, 2017

Individuals on the cusp of retirement seem to be getting the message: Holding off on Social Security benefits as long as possible is often the best choice.

Only 28% of 61-year-olds plan to trigger benefits at age 62, when they first become eligible, according to a survey from Fidelity Investments. That is down sharply from the 45% who said they were planning to do so when Fidelity last asked the question in 2008.

Looking at a broader age group, Fidelity found that 21% of those ages 55 to 61 planned to start tapping Social Security at 62, down from 27% in 2008.

While there are many claiming strategies, especially for couples, waiting longer typically has a big payoff for those in good health. Your monthly benefit rises by about 8% every year you delay between ages 62 and 70. Simply waiting until full retirement age (66-67, depending on age) can boost retirement income by 30%.

There may be more than smart planning at work. The 2008 survey came amid a recession, when unemployment rates were up and many looked to Social Security to plug some financial holes. A solid economy in recent years has given individuals more options for retirement income.

Still, the numbers are encouraging.

Less encouraging is the fact that other aspects of the Social Security program remain confusing to vast numbers of pre-retirees. For instance:

  • 38% incorrectly believe they can easily switch their claiming strategy after making an initial choice. That is possible only under unusual circumstances, including suspending benefits for a while or paying back the benefits you have already collected.
  • Two-thirds do not realize you must file for benefits 3 to 4 months before receiving your first check. This is a critical consideration if income is tight and you cannot change your final day of employment. To get an idea of your benefit, check out this website.
  • Only a quarter know their full retirement age, which is a key date for receiving higher monthly benefits. Your full retirement age is easily found at the Social Security website.
  • Finally, about half do not understand that the claiming strategy of an ex-spouse has no bearing on their own benefit. Those who were married for 10 consecutive years and haven’t remarried are entitled to either their own benefits or 50% of the former spouse’s benefits — whichever is higher—once full retirement age is reached. An ex can do as they please. It makes no difference to their former spouse’s benefit.
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