Lawmakers propose to push back retirees’ Social Security benefits later
The Yahoo Finance Live team discusses a proposal to have retirees take their Social Security benefits later than usual.
Video Transcript
- Social security benefits aren't always easy to understand. But a bipartisan group of lawmakers want to change all that. In a draft letter to the Social Security Administration, lawmakers write that evidence shows delaying a retiree's claim of benefits past the age of 62 is, quote, "financially advantageous for most Americans, as it provides them with a greater monthly benefit for the remainder of their lives." As of right now, if you claim your benefits at age 62, born in 1960 or later, around $1,000 monthly benefit would be reduced 30% to $700, Seana. That's a whopping $300 loss.
And according to the Social Security Administration, 62 is still a common age for Americans to claim their benefits. But in 2018, 35% of men and 40% of women age 62 began the program. One study has found retirees collectively lose $3.4 trillion because they claim Social Security at a, quote, "financially suboptimal time." That shakes out to a loss of $111,000. 100 grand-plus per household. Lawmakers want to close this gap and encourage people to claim their benefits later, if you got all that, my friend.
- That was a lot to digest--
- You taking notes?
- --there. Yeah. The takeaway-- you're leaving a heck of a lot of money on the table if you claim Social Security early. So let's talk about what these policymakers want to do to accomplish all this. Senators are proposing a new bill, pushing for two changes. The first is for Americans to receive explainer paper statements starting at age 25.
Now, these statements would help Americans understand their retirement options and get updates on where they stand. You would first get these statements every five years. The frequency of the statements would increase to once every two years at the age of 55. And then you get annual statements starting at the age of 60. The idea is that at that point you would have had more time to prepare and educate yourself on the best option so you won't be leaving that money on the table. So that's the first change that lawmakers want to make.
The second change has to do with the language. If you claim benefits starting at 62 years old, it's currently referred to as, quote, "early eligibility age." Now, lawmakers want to change that to minimum benefit age to better communicate that if you cash out starting at 62, you're getting the minimum monthly benefit. Full retirement age would change the standard benefit age. And delayed retirement credit would change to maximum benefit age. So really putting it in plain English.
