Changing how Social Security filing options are presented could make a big difference. The earliest eligibility age for Social Security is 62 years old, and not surprisingly, many seniors choose to apply for benefits after turning 62.
But, applying for Social Security at age 62 requires accepting a permanently decreased pension. And considering that many people begin their senior years without substantial retirement money, this reduction can be troublesome.
For some individuals, claiming Social Security at age 62 is a matter of need. A later-in-life job loss, for instance, might require someone to apply for benefits as soon as feasible, notwithstanding their desire to wait. Similarly, a person unable to work because of a medical condition might be eligible for unemployment benefits.
A bipartisan group of legislators is urging the Social Security Administration (SSA) to alter how it presents the benefits and downsides of applying at certain ages. The objective is to encourage more older citizens to wait for Social Security — and as a result, receive a greater monthly payout.
It’s all about communication.
A group of legislators requests that the Social Security Administration modify its language on the application. The objective is to make it obvious that there are repercussions for claiming Social Security benefits early and financial benefits for waiting to apply.
After reaching full retirement age, Social Security recipients are entitled to full monthly payments based on their separate earnings records (FRA). Depending on the year of birth, the FRA is 66, 67, or anywhere in between. In the meanwhile, claiming Social Security payments before FRA results in a permanently lower payout, but postponing benefits beyond FRA increases them by 8% each year until age 70.
Although enrolling at a later age than 62 is financially advantageous, roughly 35 percent of males and 40 percent of women choose to enroll at 62, according to the abovementioned politicians. And this leads to an average lifetime loss per household of $111,000.
Yet, some seniors may register for Social Security at age 62 without completely comprehending the ramifications or fully appreciating the benefits of waiting. So, lawmakers are requesting that the SSA better communicate this information.
Particularly, they want the age of 62 to be referred to as the “minimum benefit age” rather than the “early eligibility age” This communicates more effectively that filing at age 62 will result in a minimal reward.
Legislators seek to rename the full retirement age as the “standard benefit age” and the 70 as the “maximum benefit age.” Again, this better describes the benefits of a late filing.
If this legislation passes, the SSA’s instructional and informative materials will be updated to reflect these modifications. This should make it simpler for filers to make more informed decisions.
An increase in mailed statements might also be beneficial.
In addition to modifying the Social Security terminology, lawmakers want the SSA to give recipients printed wage statements more regularly. Presently, they are only delivered to individuals aged 60 or older; however, younger workers can view them on the SSA’s website.
Earnings statements do not just summarize annual wages; they also contain projections of Social Security payments depending on the filing age.
By increasing the frequency of these mailed notices, it is hoped that recipients will be better informed of their potential monthly benefits depending on their filing age. This, paired with more comprehensible language, might encourage more seniors to apply for Social Security after age 62, which will secure greater long-term financial security.