Wednesday, October 24, 2018

Expand Social Security…by Delaying Retirement

Writing for MarketWatch, Brenton Smith points that that early retirement can cause huge cuts in Americans’ Social Security benefits, far larger than an proposals to expand Social Security would fix.

The harsh reality is our benefit levels today reflect decisions that current seniors made decades ago. While we hear a lot today about the benefits of delaying the first check from Social Security until the age of 70, well over half of the retirees in the 1990s elected to take the money at 62. These people are now in their mid-80s and collecting only 80% of their full monthly benefit.

More troubling is the fact that this impact will get worse as the discount for early retirement rises. In 2010, nearly 80% of retirees claimed benefits before full retirement. Someone retiring at 62 today will get checks that are 26.3% smaller. Soon enough, people who choose to at 62 will receive benefit checks that are 30% smaller, as the normal retirement age increases to 67. (You get a bonus if you wait past your retirement age.)

If benefit checks are insufficient to keep seniors from falling into poverty-ridden old-age, we need to look at the rules of early retirement and their curious incentives designed to create the low benefit levels in later years.

Click here to read the whole article.

1 comment:

WilliamLarsen said...

Maybe it is time to repeal Social Security? People drawing benefits complain it does not pay enough.

Young workers say they are paying far more for their SS Benefits before any reform takes place.

Under current law the SS benefit is getting smaller as the full effect of the 1983 "PATCH" is fully implemented.

Do not forget the up to 85% of SS benefits being subjected to taxation which in the 12% tax bracket can claw back 10.2% of potential SS checks.

So what is the basic concept of any reform of Social Security?

"It is an agreement that we make with ourselves that our kids will pay the taxes that we didn't, and will accept the benefit cuts that we will not even talk about.