Age 62 is the earliest age to sign up for Social Security. And not surprisingly, many seniors opt to claim benefits once their 62nd birthday arrives.
The problem, though, is that filing for Social Security at age 62 means accepting a reduced benefit for life. And given that many people don't kick off their senior years with a lot of retirement savings, that reduction can end up being problematic.
Now for some people, the decision to claim Social Security at 62 stems from necessity. Job loss later in life, for example, might force someone to sign up for benefits as early as possible despite wanting to wait. Health issues rendering someone unable to work could do the same.
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But now, a group of bipartisan lawmakers is pushing the Social Security Administration (SSA) to change the way it explains the advantages and drawbacks of filing at different ages. And the goal is to encourage more seniors to wait on Social Security -- and score a higher monthly payday as a result.
It's all about the messaging
A group of lawmakers is asking the SSA to change its wording around the benefits-claiming process. The goal is to make it clear that there are consequences to signing up for Social Security early and financial upside to waiting to file a claim.
Social Security beneficiaries are eligible for their full monthly benefits based on their respective earnings histories once they reach full retirement age (FRA). FRA is either 66, 67, or somewhere in between, depending on year of birth. Meanwhile, filing for Social Security before FRA results in a permanently reduced benefit, while delaying benefits beyond FRA boosts them by 8% a year up until age 70.
While filing at an age later than 62 is clearly beneficial from a financial standpoint, almost 35% of men and 40% of women opt to sign up at 62, the aforementioned lawmakers claim. And that results in an average lifetime loss of $111,000 per household.
However, some seniors might file for Social Security at 62 without fully understanding the consequences of doing so, or without fully recognizing what they stand to gain by waiting. And so lawmakers are asking the SSA to better convey that information.
Specifically, they're asking age 62 to be called the "minimum benefit age" instead of "early eligibility age," which it's currently called. That better sends the message that filing at 62 will result in a minimum benefit.
Lawmakers also want full retirement age to be changed to "standard benefit age" and for age 70 to be called "maximum benefit age." Again, this better conveys the upside of a delayed filing.
If this legislation passes, these changes will be included in all of the SSA's educational and informational materials. That should, in turn, make it easier for filers to make a more informed decision.
An increase in mailed statements could help, too
In addition to changing the verbiage around Social Security, lawmakers also want the SSA to send out paper earnings statements more frequently. Currently, these are only mailed out annually to workers age 60 and over (though younger workers can access them via the SSA's website).
Earnings statements don't just summarize wages for the year. They also include estimates of Social Security benefits based on filing age.
By increasing the frequency of these mailed statements, the hope is to better inform recipients of what monthly benefit they're looking at based on different filing ages. That, combined with more digestible language, could inspire more seniors to sign up for Social Security at a later age than 62 -- and buy themselves more long-term financial stability in the form of higher benefits.
