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August 31, 2015 at 09:42 AM
Having failed to plan for retirement, many U.S. workers are taking Social Security benefits early, often because unexpected life events are forcing them to do so.
That’s the sobering conclusion of new research from Nationwide Retirement Institute. Conducted by Harris Poll, the survey polled 902 adults ages 50 and older who are retired or plan to be in the next 10 years.
The survey shows that more than 8 in 10 (83 percent) of recent retirees started taking their benefits earlier than their full retirement age.
Result: a smaller monthly paycheck. Early retirees polled by Nationwide peg their average monthly payment at $1,174. In comparison, those leaving the workforce at full retirement an average monthly payout of $1,590. The figure jumps to $1,752 per month for individuals retiring late.
“Social Security is often a large piece of American workers’ total retirement income, and the decision on when to file shouldn’t be forced on anyone,” says David Giertz, president of distribution and sales for Nationwide. “If handled incorrectly, retirees could be missing out on hundreds of thousands of dollars in retirement income.”
No doubt. As we’ve previously reported in this space, a 62-year-old retiree eligible for Social Security income of $1,000 per month could boost the payout to $1,500 per month by waiting to age 67.
The $500 (50 percent) increase has to be weighed, however, against another reality: the $1,000 per month in lost income. Christopher Hill, a contributor to LifeHealthPro, calculates that the 67 year-old retiree would need 15 years to arrive at a break-even point (i.e., where the total of the additional $500 matches the $1,000 payout).
Also to consider: the loss of interest income. Brenton Smith, another LifeHealthPro contributor, writes that the Social Security income a 62-year-old retiree receives over a “normal” lifespan is about equal to the payout a 70-year-old would get when you factor in foregone interest.
The income lost by waiting may help to explain the decision of some retirees to begin taking income early. But the Nationwide report points to other reasons.
Chief among them: the need for money. Nearly 4 in 10 of the survey respondents (38 percent) cite the financial need. An additional 3 in 10 (30 percent) flag health problems. And just about a quarter of those polled (24 percent) say the loss of employment forced the issue.
