Retirement Threatened by Potential Social Security Errors as Nearly Half of Americans Face This Threat
Claiming Social Security benefits before your full retirement age (FRA), which ranges from 66 to 67 years depending on your birth year, can have significant long-term financial implications. If you choose to claim at age 62, for instance, your benefits could be reduced by up to 30% compared to waiting until the FRA [3][4].
The Impact of Early Filing
Early filing results in reduced monthly benefits, which in turn affects your total lifetime income. Additionally, early claiming can reduce the survivor benefits available to a spouse after your death [5]. Lower monthly benefits may also strain other retirement resources, such as Individual Retirement Accounts (IRAs), especially if retirement lasts several decades.
The Do-Over Option
Social Security offers a 'do-over' option, allowing individuals to withdraw their application within 12 months of filing. To do this, claimants must repay all benefits received during that period and can then reapply later to potentially receive higher benefits [2][3]. This option is available once per lifetime and must be used within a year of claiming benefits initially.
Considerations for Using the Do-Over
The decision to use the do-over must be made promptly, as there is limited time to repay benefits and reapply. Some individuals may struggle to repay benefits, especially if they've already spent them, highlighting the need to carefully consider the timing of claiming benefits initially. If used effectively, the do-over can allow individuals to delay claiming until a later age, potentially increasing their monthly benefits by allowing them to grow until age 70 [3][4].
Before claiming benefits, it's beneficial to spend time reading up on Social Security's various rules to help identify the most suitable filing age and avoid cash-strapped situations during retirement. The FRA varies based on the year of birth, ranging from 66 to 67 years.
A recent survey showed that 49% of respondents incorrectly believe that filing for Social Security early will result in their benefits being increased to the full amount at FRA. However, this belief is incorrect, and benefits remain reduced for the entire lifetime of the beneficiary unless the do-over option is used.
Beneficiaries can start receiving Social Security benefits as early as age 62. However, understanding the rules could help you make an informed decision about the best time to claim benefits and maximise your retirement income.
- If an individual chooses to use the 'do-over' option, they must repay all benefits received within 12 months and can then reapply to potentially boost their personal-finance during retirement.
- Delaying personal-finance decisions about claiming Social Security benefits until a later age, when possible, can lead to increased monthly benefits, which in turn could help sustain personal-finance and reduce strain on other retirement resources.
