Baby Boomers about to retire fear outliving their retirement assets more than they do dying. But they might be right to worry.
The Social Security and Medicare Administration says, “Neither Medicare nor Social Security can sustain projected long-run programs in full under currently scheduled financing, and legislative changes are necessary to avoid disruptive consequences for beneficiaries and taxpayers.”
If Boomers can’t rely on these programs as their parents did, this means they will have to do the work themselves.
Another survey by BMO Retirement Institute found 83 percent of retirees chose to start their social security benefits early because they were concerned the program would run out of money by the time they reach full retirement age.
If these folks are worried today, the next generation has even bigger problems. Experts predict the program’s trust fund will run dry in 2033.
“Unfortunately, based on the evidence, retirees are taking their benefits too early, are not making informed decisions and are not aware of options and strategies that could result in higher benefits,” according to the study by BMO. “This can cost them and potentially their spouses tens of thousands of dollars in the long run.”
While you can start collecting Social Security anytime, the decision is highly personal and is not a one-size-fits all. According to socialsecurity.gov there are numerous factors you should consider before you decide to collect benefits.
So what should the 78 million Baby Boomers edging toward retirement do?
- While you can start collecting Social Security before reaching full retirement, the longer you wait the more benefits you will be entitled to. According to forbes.com, if you decide to collect at age 62 rather than wait until you’re 70, your check will be about 25 percent smaller than if you wait for full retirement. And, if you wait until age 70 you could get 32 percent more than normal.
- Experts agree that unless you really need money to survive, you should put off claiming benefits until you reach retirement age. For instance, Forbes says until you reach the full retirement age, for each $2 you earn in 2013 above $15,120, you lose $1 of your annual Social Security benefits. But, if you start to collect after 66, benefits don’t get cut no matter how much you earn.
- If you’re a couple, you could be eligible for spousal benefits. BMO says almost four in ten people will be able to make a claim on a spouse or former spouse’s benefit. Be sure to find out what the benefit rules are for widows and divorced spouses.
For more information to help you plan an effective retirement strategy, visit Consolidated Credit’s seven-part section on creating a solid retirement plan.