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Baby Boomers are making a big mistake when it comes to Social Security. Unfortunately, it is a mistake that could cost them for the rest of their lives, and it is an error that’s very difficult and often impossible to undo.
Here’s the Social Security choice that far too many Boomers are making that could end up coming back to haunt them.
Baby Boomers are making a bad Social Security choice
Baby Boomers are between the ages of 60 and 79, which is the age when they have a critical choice to make about their Social Security.
That choice is exactly when to claim their benefits — and far too many Boomers are making a decision that could cost them a ton of money. Specifically, data from Bankrate shows that close to a quarter of all retirees claim their Social Security benefit at 62, making it the second most popular age to claim benefits.
Other popular claiming ages include:
- 65 (11.3% claim at this age)
- 66 (34.1% claim at this age)
By contrast, only 9.1% of retirees claim Social Security between the ages of 70 and 75. And, this is unfortunate, given that the age of 70 is the best age for the majority of retirees to claim their benefits.
While you become eligible to start checks at 62, an early claim before your full retirement age will result in a reduction in your standard benefit. Furthermore, any claim before age 70 will result in retirees collecting less than the maximum income available to them since Social Security benefits keep increasing until age 70.
Boomers aren’t just reducing their monthly income with this claiming choice, either. The National Bureau of Economic Research found that more than 90% of younger Americans are better off waiting until 70 to claim benefits because this gives them the best odds of maximizing lifetime income.
By claiming earlier at a suboptimal age, retirees are leaving an estimated $182,370 on the table. This data likely holds true for Boomers as well, as Boomers are also enjoying longer life expectancies than workers did at the time when Social Security’s system of early filing penalties and delayed retirement credits was created.
Boomers who claim benefits early often can’t undo their choice
Unfortunately, once a Boomer claims their Social Security and starts their checks early, this is often a permanent choice.
Now, technically, there is a process for undoing an early Social Security claim. If you start benefits early, you can rescind your claim within the first 12 months of making it. The catch is that you have to pay back every single dollar of benefits that you collected. This is impossible for many, so rescinding benefits isn’t really a viable solution for those who make the mistake of an early claim.
The 12-month limit for rescinding benefits is also a problem, as Boomers who end up regretting their early Social Security claim may not realize until later in life that they should have made a different choice. Their decision to shrink benefits is likely to catch up with them at the tail end of their retirement when their savings is dwindling, or when one spouse dies, and the surviving spouse realizes that their partner’s early claim ended up shrinking survivor benefits.
For Boomers who don’t want to be left with regrets, it’s important to carefully consider the optimum claiming age before starting your benefit check.
Given the importance of this decision, those who are thinking about retiring should seriously consider talking with a financial advisor first to find a strategy that makes sense for their situation. With professional advice, Boomers can consider all the long-term implications of their Social Security claim so they make the decision that’s best for their financial security throughout the entirety of their later years.