People who wait until they reach full retirement age are entitled to full Social Security benefits. It is possible to start getting Social Security benefits from age 62 on up. But people who claim early get only a fraction of the benefits. Claiming early permanently shrinks their monthly check.
So postponing the date at which you claim benefits will result in more money in your pocket, according to The Sun. In fact, waiting even longer will raise your benefit amount even further. For example, some people choose to wait until age 70 to retire.
Social Security Trustees Report It Won’t Be Able to Pay Full Benefits by 2034
When the Social Security Board of Trustees released its annual report last year, it projected that Social Security will be unable to pay out full benefits starting in 2034, per Yahoo.
After 2034, the fund’s reserves will be tapped and the income tax that funds Social Security will only be able to support 78 percent of the scheduled benefits. And that should worry today’s young people especially.
“I’ve had questions, especially from older clients,” Kris Jerke, president of Ascend Financial, told Barron’s. “I’m not as concerned about Social Security in regard to them and their future as I am for our 25- to 30-year-olds that have 30 or 40 years to retirement. I tell them, plan for [Social Security] not being as substantial down the road.”
But some are downplaying the threat, saying Congress will step in and do something – like raise taxes – to keep benefits from running out.
“They always act, because of the political realities,” Nancy Altman, co-founder and president of Social Security Works, told Barron’s.
Debate Continues Over Recent Cost-of-Living Adjustment
Social Security recipients this month received the biggest cost-of-living adjustment (COLA) in decades. That was to offset the costs of skyrocketing inflation. The 5.9 percent increase did not quite track the 7 percent year-over-year increase in consumer prices. But it was close.
The COLA took effect this month, CNBC reports. Meanwhile, some policymakers and experts have begun debating whether the annual COLA adequately keeps up with the price hikes plaguing seniors.
Lawmakers on Capitol Hill have proposed a new bill that would change the measurement used to determine the COLA. Under their plan, it would switch from the Consumer Price Index for Urban Wage Earners and Clerical Workers to an experimental index, the Consumer Price Index for the Elderly. But detractors point out that using the latter index would have yielded a COLA increase of just 4.8 percent this year rather than 5.9 percent.
Ultimately, between inflation and the recent findings of the Social Security trustees about the fund’s solvency, looks like it makes sense for workers to build up a bigger nest egg before retiring.