Rosalind Evans
Dispelling the Persistent Myth
The American Social Security system is battling a detrimental myth that encourages many to claim their benefits too soon. Emerson Sprick, Associate Director of the Economic Policy Program at the Bipartisan Policy Center, says, “The biggest myth about Social Security is that when the trust fund runs out, the program is just going away.” Despite widespread concerns, even if the trust funds are depleted, the program will continue to operate with income from payroll taxes, though benefits could be reduced.
Challenging Popular Belief: The Reality of the Trust Fund
A recent Social Security report highlighted how a strong economy has benefitted the program. However, Social Security’s trust funds may be exhausted within the next decade without future changes. Despite this, 75% of adults over 50 believe Social Security will run out during their lifetime, according to a 2023 Nationwide Retirement Institute survey.
Premature Decisions: Why Retirees Claim Early
Data shows that many retirees do not wait until they are eligible to receive 100% of their benefits. The most popular age to claim is 62, with 29% of beneficiaries doing so at the earliest possible age in 2022. Thus, beneficiaries take about a 30% benefit cut for not waiting until their full retirement age—moreover, 62% of beneficiaries claimed before their full retirement age in 2022. The top reason for this early decision is fear that the money might run out, followed by immediate financial need.
Benefits of Waiting: Enhancing Retirement Security
Experts agree that it is generally best to delay claiming retirement benefits. Teresa Ghilarducci, a professor at The New School for Social Research, notes, “Everyone should know that you have a penalty if you collect before 70.” Indeed, even waiting just a few months can be beneficial. Delays of six, twelve, or eighteen months are “beneficial retirement security moves that you can make,” according to Sprick. Furthermore, Social Security benefits are annually adjusted for inflation, meaning that the annual increases are higher when applied to more significant benefit amounts.
Rethinking Retirement Strategy
It is crucial to rethink retirement strategies to maximize Social Security benefits. Despite the myths and fears, careful planning and a clear understanding of how the system works can lead to more robust financial security in the golden years. As Sprick suggests, it is essential to understand and demystify the beliefs surrounding this crucial benefit program.
