Many people wonder when the best time is to start collecting retirement benefits from Social Security. The longer you wait, the more you get, but there are other considerations as well. The process of deciding when to claim Social Security can be tricky—but the Consumer Financial Protection Bureau (CFPB) is trying to make it a little easier.
“Planning for Retirement” is a new online tool that lets folks estimate how much money they’ll get if they claim Social Security at an earlier or later age, and offers advice on how to weigh the benefits and drawbacks of different decisions.
Richard Cordray, director of the CFPB, said the retirement planning tool will help people see their options more clearly when it comes to making decisions about Social Security. “Deciding when to claim Social Security benefits is one of the most important financial choices a consumer will make,” said Cordray, pointing out that many people are facing financially insecure futures and depending on government benefits to bridge the gap in the their golden years.
Lack of awareness, but more reliance on Social Security
Although many consumers don’t fully understand how Social Security works, more people are relying on their benefits as a sole income during retirement than in previous years, said the CFPB. They released a report in conjunction with announcing the new tool on their site, which revealed some startling discrepancies between people’s knowledge and their needs.
One recent study cited in the report showed that only 12% of people knew how their benefits would change depending on when they claimed them. Only 5% knew how their benefit amount was calculated. Despite this confusion, 40% of people ages 51-59 said they have very limited retirement savings, or none at all. And 46% of Social Security claims in 2013 were made by folks turning 62—the youngest possible age for claiming benefits.
The average American turning 65 this year will live to age 85. That means they need funds to live on for 20 years or more. Since traditional pension plans are less common these days, Social Security is the only income some people can count on in retirement. The CFPB estimates that almost two thirds of people ages 65 and older are depending on Social Security for at least half of their retirement income. And for many folks ages 80 and up, it accounts for 70% of their income.
Wondering what your benefit would be if you took retirement at 62, 72, or even later? Click here to find the CFPB’s “Planning for Retirement” tool and try it for yourself.