Posted on 02/02/2022 6:22:47 PM PST by SeekAndFind
(The opinions expressed in guest op-eds are those of the writer and do not necessarily represent the views of RedState.com.)
Most Americans know they are able to claim benefits from Social Security at any age between 62 and 70, where claiming later in life results in higher monthly checks, but fewer of them. Unfortunately, most are unaware that early retirement is by and large a bad decision for the individual, and a poor choice to offer workers approaching retirement.
It is a 50-year-old solution to a 50-year-old problem, shaping the way people retire today.
By way of background, the rules for early retirement were established in 1961, and expanded in 1983 to reflect the gradual increase in normal retirement age. The feature was added to Social Security to give retirees the ability to spread the same level of projected lifetime benefits over a retirement that may not line up with the fixed traditional timeline defined in law. According to the Social Security Administration, early retirement was created by Congress to offset the economic difficulty “faced by many older men who have been displaced from their jobs before they reached retirement age Congress in 1961 to reduce from 65 to 62.”
While early retirement sounds great, the retiree accepts a reduction in monthly benefits that lasts a lifetime. According to the Social Security Administration, the total benefits received by a retiree over a normal lifetime will be essentially the same whether they claim at 62, 67, or 70. In theory, the claiming date changes when you collect benefits — not how much.
Thus, the working principle behind early retirement is: People should retire for a longer period of time, on less annual income.
How is that strategy working? Not well, according to Democratic lawmakers who believe that Social Security benefits need to be expanded. They, of course, see a problem and ignore the cause. If benefit checks are too small, the cause is the number of people who take benefits early. In 2020, the average benefit claim in total was $1,635.95. The checks not penalized for early claiming averaged $1,917.54.
The whole point of Social Security is to provide a hedge against the costs of living over a long time. In contrast, early retirement offers the retiree money now, in exchange for less security in the future. That decision is not terribly different from buying a faster car with cash saved by buying less auto insurance.
The downside of this strategy is that many of these retirees will live long enough to regret the decision. A new retiree today expects to live to roughly 85 on average. Today’s 85-year-old became eligible for benefits at 62, in 1997. That year, nearly 70 percent of retirees took the money early in exchange for permanent reductions to the level of benefits. Democrats now argue that the program needs to provide a five percent increase in benefits to the people who traded away their benefits in the past.
Allowing people to trade future security for money now has a predictable outcome. According to the National Bureau of Economic Research, the enactment of the Early Eligibility Age in the 1960s led to a one percent rise in the overall poverty rate from 1968 to 2001 in the elderly beneficiaries, poverty which tended to focus on lower-income households.
The story actually gets worse because the “actuarial adjustments” have deteriorated over the decades since the last update. The fact is that people are living longer. As they do, early retirement actually reduces lifetime benefits. According to research from the Center for Retirement Research, outdated actuarial adjustments penalize retirees who claim at the age of 62 by about 10 percent, or $120 per month. If retirees knew this fact, maybe 62 wouldn’t be the most popular age to claim benefits.
If 10 percent doesn’t sound like a lot, keep in mind that Democrats in Congress want to plug the holes in the finances of seniors with a system-wide increase of two percent.
I do not have a solution here. Giving people the choice to trade future security for money now isn’t clear thinking. Moreover, there is no reason to think that Congress will monitor a revised policy any better. If we have laws unsupervised for 50 years, the policy works only as a matter of luck rather than forethought.
Early retirement will be 62 next year. It is time that it retires for good.
Brenton Smith is a policy advisor at The Heartland Institute, with work appearing in nationally recognized publications including Barron’s, Forbes, MarketWatch, The Hill, USA today, and more.
Lots of folks would probably be happy to work to 66 or 70, but corporations routinely discard their most experienced workers, and some folks struggle to make ti to 62, and hope their health hold out until they qualify for medicare.
Given the government’s increased interest in killing off seniors at an earlier age, noted particularly the past two years, of course they want them to wait until 70.
I lean towards taking SS as soon as you can, all else being equal.
Not everyone is an office worker or BS writer. Some people do hard labor in dangerous environments. These people get beat up physically. Also someone in poor health may retire early since dying prior to full retirement leaves you with ZERO benefits for a lifetime of work.
Until governemnt workers at every level are required to work to full retirement age to collect a pension, the aying the tab should have some options.
Agreed.
You entirely miss the REAL problem!
Government engineered automatic inflation
is the real problem.
Actuaries have figured out that whether you retire at 62 or 70
the cost to society is the same.
the problem is inflation, which they don’t factor in.
That is the poverty problem.
Democrats are idiots.
I took mine early and continued working. I finally REALLY retired two years ago at age 75.
I started collecting at age 64. I get less money than I would at age 70, but I did the math- it would take me 12 years to break even.
I won’t be around in 12 years.
I’m 60, self employed truck driver/owner. I work 70-84 hour weeks 10 months of the year, and 60 hour weeks the other two months. Do I want to retire early and stop working so hard? Hell yes. Will I? Nope. 66 and Medicare is important given the need for health care as we age and the cost of insurance.
I too am taking SS as soon as I can. So that in my early retirement years I’ll take less from my investments to live on. That way they grow more — beating inflation.
I think the break-even point for those with a decent sized portfolio is further out than the typical 62-70 break-even calculations that are looked at in a vacuum.
My brother paid in the full rate for many years, and he had great earnings.
He didn’t need the money, so he waited until 70.
Problem was, he died at 69 years, 2 months.
In all of these financial analyses, there is no discussion of quality of life considerations associated with getting out of the rat race and enjoying yourself while you are still fairly young, healthy, and ambulatory.
They also never acknowledge the almost certain fact that people who wait will be end up being given a financial haircut when the ponzi-piper demands his due, lessening or even eliminating the promised financial advantage for waiting.
Do the math, and if you can get out early, I say Go Gault.
Corporate/welfare state/globalist propaganda. Life is short! Retire as soon as you can and enjoy the few years you have left.
Well, if you could wait until next year…that would be cool. Thanks.
It’s tragic. If only retirees were Afghan or Ukrainian, a Central American or African migrant, or a Chinese communist biolab... the trillions would shower down on them like a waterfall of money. It would be considered crass to even ask how much is being spent.
But a normal American? Suddenly the US Government becomes the model of fiscal responsibility.
Umm, the level of benefits vs age at retirement are clearly known. If someone takes early retirement one has to assume the individual has made that decision based on his/her own circumstances. In other words, it’s none of your f’n business Brenton Smith.
They need to stop stealing people SS benefits through the Windfall Elimination Provision.
https://www.ssa.gov/pubs/EN-05-10045.pdf
A handful of people I know started SS right at 65 or just before 65. They timed it with starting Medicare so that the Medicare Part B premiums could be taken out of their SS checks. One less item to have to deal with each month in retirement.
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