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Retirement
Mistakes
By : Don Burrows , Jr . Hilltop Securities , Inc . don . Burrows @ hilltopsecurities . com
Retirement Mistake # 4 Taking Social Security Benefits Too Early
Taking Social Security benefits too early can be a major mistake for many people . First , they don ’ t realize how much more money they can receive by waiting until they are 66 or 70 . They don ’ t take into consideration , for example , if they have money in an IRA or a 401K , let ' s call it taxable money , it can hold them over without depleting all of their resources . They can wait until age 70 as opposed to age 62 . Social Security benefits increase by approximately 7 percent each year you delay taking it from age 62 to 66 , and by 8 percent a year until age 70 . Basically , you can look at it as a guaranteed return that you probably wouldn ’ t get in the market .
According to the Nationwide Retirement Institute , only 15 percent of us elect to wait to full retirement age ( 66 ) to take benefits , and just 10 percent start taking Social Security after age 70 . Of course , when life expectancies were in the mid-70s , it made sense to take benefits early . But now people are living in to their 90s . If you live to be 100 and you claimed your benefits at 62 instead of 70 , you lost a lot of money !!
The full retirement age is 67 if you were born in 1960 or later , and workers in that demographic who took Social Security at age 62 would lose 30 percent of their full retirement-age benefit . All told , more than half of Americans start collecting Social Security at 62 -- and four out of five women . The " wait to take " is especially important , given increasingly extended lifespans . Women who reach 65 are expected to live to 86 , according to government tables , and 25 percent will live past 90 . Men who reach 65 can expect to live to 83 . The National Retirement Institute reports that women who take Social Security benefits early average a payout of $ 1,025 per month . But by waiting until full retirement age , that payout rises to $ 1,270 . And if a woman waits to age 70 ( with at least 16 years of life expectancy left , presumably ), that payout rises to $ 1,630 .
The various options for the claiming of Social Security benefits can be very confusing . Even for those who are fairly educated about the system . It is especially confusing for those who have no experience and no knowledge and are depending on their benefits to maintain their lifestyle in retirement . Here is a story about a client who is a widow and who our team helped through the Social Security maze :
Our client worked as a customer service rep for JC Penney during the early part of her career , and for the past 8 years she has been working at Walmart in the housewares department . Her husband , who also worked for JC Penney , passed away recently . He didn ’ t have much money , but they both did a good job of saving as much as they could . She came to us to aggregate all of her assets which were still at all the former employers and different funds . She told us she wanted to collect her Social Security benefits at age 62 . However , after discussing this with her , we discovered she didn ' t know anything about the option of receiving spousal Social Security benefits from her deceased husband , which interested her .
We wanted to confirm the information about the spousal benefits and the process of collecting them , so we went to the Social Security office with her . It took us about two hours to receive complete and accurate information . In fact , we still needed additional information , so we asked for a senior person to explain more of the details to us . Our client liked that option . As it turned out , by our client claiming spousal benefits , she is receiving about $ 1200 more than she would have if she had claimed her own benefits . We were all happy that she was able to collect more money for her retirement . We especially enjoy going the extra mile for clients to give them a financial edge .
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