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This common Social Security strategy could cost you $182,000

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Americans are tempted to get the most out of Social Security, but many retirees make strategic mistakes that can cost them tens of thousands of dollars in lifetime benefits. research From economists at Boston University and the Federal Reserve Bank of Atlanta.

This analysis examines the question of the optimal age to claim Social Security in order to maximize a retiree’s lifetime disposable income, that is, after-tax money, living expenses, and other essential expenses. The Social Security Administration pays workers full benefits in what it calls.”full retirement age” ranges from 66 to 67, depending on the year of birth.

But people can still claim Social Security as soon as they turn 62, but at the cost of a 25% reduction in their monthly check. Conversely, if a worker waited until she was 70 to join Social Security, instead of withholding her payments, she would be paid 32% more.

But the reality is that only 6% of US workers wait until they turn 70 to claim Social Security.

$182,000 hit

Claiming Social Security too early has very real costs. By claiming before turning 70, the typical worker leaves about $182,000 in lifetime discretionary income on the table, the report notes. I don’t have enough savings to survive old age.

Nearly half of Americans claim Social Security before reaching full retirement age, and about a quarter do so at age 62, according to Social Security Administration data.

Americans “have to change their minds,” Lawrence J. Kotlikoff, one of the study’s co-authors and an economics professor at Boston University, told CBS Moneywatch. It’s too early to claim that “they think they’re going to die tomorrow and that leads people to jinx.”

Some people decide to apply for Social Security early based on a life expectancy of 65 years (83 years for men, 85 years for women). But a better rule of thumb is to consider what Kotlikov and his co-authors call “financially speaking, the worst possible outcome”: you could live into your late 90s or even 100.

The bottom line is that you can’t expect to die on time. maximize my social security Co-author of “”.get yoursInstead, Americans should use financial strategies that help delay claiming Social Security, which increases lifetime discretionary income, he said.

“find a job”

Almost half of Americans over the age of 55 no retirement benefitsThis means that these workers will be more dependent on Social Security as they get older, and they may want to claim early because they will have a steady income as soon as they turn 62.

But Kotlikov said those who are still active at age 62 should stay in the labor market rather than claim social security. He added that the only time it might make sense to claim early is for people with terminal illnesses or disabilities.


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“Most of the early retirees are able-bodied, so it’s a great labor market for them. They should find a job and work,” he said. “The fact that we’ve been retired longer than we’ve been working is ridiculous.”

Besides working longer, there are several strategies workers can employ to defer Social Security claims until they are of full retirement age or beyond. For one thing, he noted, people with retirement savings in 401(k) or other accounts can withdraw that money first. Cost-saving measures, such as getting older, can also help you survive until you reach 70.

save more

Of course, the flip side of waiting to claim Social Security is the potential cash flow reduction if someone is in their early to mid-sixties, the paper notes. We find that the impact of deferred coverage on household cash flows may not be as great as feared.

“We found it [waiting to claim Social Security] Kotlikov says the median cut people’s spending by 7%. This is the message that people think they have no means of livelihood, but that many people have resources outside of Social Security.

Overall, Americans need to save far more money for old age, he added. People think he needs $1.25 million in savings to ensure a comfortable life in old age. according to In a recent study of Northwestern Mutual. Still, a typical U.S. retirement account is less than $87,000 for him.

“People have left Uncle Sam and his employers in the care,” Kotlikov said. “We’ve seen the results.” “It’s tough love time.”

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Written by Natalia Chi

Chicago Popular; Chicago breaking news, weather and live video. Covering local politics, health, traffic and sports for Chicago, the suburbs and northwest Indiana.

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