Nearly 40% of retirees who claimed Social Security benefits before full retirement age now regret their decision, according to a new survey released Wednesday.
Retirees can claim Social Security benefits as early as 62, but their benefits are permanently reduced by 25% compared to waiting until their full retirement age of 66 to begin benefits. Those who are willing to wait even longer earn delayed retirement credits worth 8% per year for every year they postpone benefits up to 70, increasing their benefits by an additional 32%.
A Nationwide Financial Retirement Institute survey released reveals that 38% of retirees say they wish they would have waited to collect Social Security benefits, resulting in a larger monthly payment.
“When and how to claim Social Security is one of the most important financial decisions retirees make in their lifetimes,” David Giertz, president of distribution and sales for Nationwide Financial, said in a statement accompanying the results of a Harris Interactive survey of more than 900 current and near-retirees 50 and older.
“The key theme throughout our survey is how crucial it is that Americans work with a financial adviser,” Mr. Giertz said. “Optimizing Social Security benefits is an important part of a holistic retirement plan.”
Those who don't take steps to maximize their benefits may be missing out on thousands of dollars per year in additional income. For a married couple, the right Social Security claiming decision can increase their lifetime benefits by $100,000 or more.
The survey found that retirees working with an adviser are more likely to be able to afford to do the things they want to do in retirement by a margin of 82% to 62%. Those working with an adviser also had a better handle on how much they could realistically expect to receive from Social Security in retirement. Only 12% of those working with an adviser said their Social Security benefits were smaller than expected. By comparison, more than one-third of those without an adviser who said they were disappointed in the amount of their Social Security benefits.
However, only one in 10 respondents — representing both current and future retirees — said their adviser gave them advice on when and how to claim Social Security benefits.
But expectations are changing. More than half of future retirees — 56% of respondents who are not yet retired — said they expect their adviser to guide them in the crucial decision about when and how to claim Social Security benefits. And 81% of those future retirees said they would switch advisers if they didn't get help maximizing their Social Security benefits.
Nationwide Financial Retirement Institute recently announced that it is offering advisers free access to its new Social Security 360 Analyzer tool that uses Social Security Timing software.
(Questions about Social Security? Find the answers in my new ebook available at www.investmentnews.com/MBFebook for $19.95.)