Many Americans claim Social Security retirement benefits at the earliest age possible but see their monthly benefit checks reduced for life because they did so.
Now, a bipartisan group of senators is proposing two changes to help encourage retirees to wait. The lawmakers include Sens. Bill Cassidy, R-La., Chris Coons, D-Del., Susan Collins, R-Maine, and Tim Kaine, D-Va.
The proposed updates include changing the language the Social Security Administration uses around the claiming process and increasing the mailing of paper Social Security statements.
The earliest age to claim Social Security retirement benefits is 62. However, those who claim at that age see a reduced benefit.
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“When to claim Social Security benefits is a critical decision for older Americans planning their retirement,” the senators wrote in a letter to the Social Security Administration.
“Most people, however, do not claim benefits at the age that would maximize their income in retirement, usually because they claim too early,” they wrote.
Social Security beneficiaries are entitled to full benefits once they reach their full retirement age — 66 to 67, depending on their date of birth. For every year delayed past full retirement age, claimants stand to get an 8% increase.
Yet 62 remains the most frequent claiming age, with almost 35% of men and 40% of women making that choice, the senators note, resulting in an average lifetime loss of $111,000 per household.
There are various reasons retirees claim at the earliest possible age, the senators note, including an inability to work, financial shocks, liquidity constraints, life expectancy or the desire to pass money on to heirs.
However, some people may start taking Social Security benefits at the soonest possible time because they are unaware of the advantages of waiting.
Some claimants who have the capacity to wait even six months to five years longer may not be doing so because they don’t “have adequate information to make an informed choice,” said Emerson Sprick, a senior economic analyst at the Bipartisan Policy Center.
New language would emphasize ‘maximum benefit age’
The lawmakers are seeking to change the language the Social Security Administration uses to better convey the advantages of waiting to claim benefits.
For example, while age 62 is currently called “early eligibility age,” the senators are calling to have that changed to “minimum benefit age.”
Ages 66 to 67, currently referred to as “full retirement age,” would be changed to “standard benefit age.”
Age 70 would be called the “maximum benefit age.”
If the legislation passes, the changes would be included in all of the Social Security Administration’s educational and informational materials — “essentially anything the public sees,” noted Sprick.
Mailed benefit statements would be more frequent
In addition, the lawmakers also propose having every person with a Social Security number receive a Social Security statement in the mail regularly throughout their earnings history.
The paper statements would be sent regardless of whether someone has established an online Social Security account, though opting out of the paper statements would be possible.
The statements would provide details on how much in benefits a person may receive at ages 62 to 70.
Paper statements would be sent whenever a person enters the work force or starts a new job. The statements would continue once every five years after a person turns 25, once every two years starting from age 55, and annually from age 60.
“Having this consistent reminder and this information about the effects that your claiming age can have on your lifetime monthly benefit, we think is really important,” Sprick said.
Research from the Bipartisan Policy Center previously identified paper statements as one method of helping to encourage Americans to claim at the right age.
Other research has also pointed out the value of changing the benefits terminology the Social Security Administration uses.
In addition to the legislative proposal, the senators also sent a letter to the Social Security Administration seeking more information on the factors that lead beneficiaries to claim early, the steps the agency may take to encourage more informed claiming decisions and what effects new benefit statements have had on claiming behavior.