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.
I retired at 58, and, gonna take my SS this year.
We’re cruising on a sailboat and I won’t be going back to work for nothing!
You work too hard!God Bless you!
Some of us married up & to younger ladies. If I retire at 62, my wife is 4 years younger than me & has always carried our insurance as she has better options & work history.
I plan on working to a later age, but I have had some serious health problems in the past and at 54, 62 looks pretty close, 57, not so obtainable.
For me I think it also depends on if you plan to retire before you turn 62, which I plan to do it my mid to late 50's. Obviously I'll be living on my retirement investing at least until I'm old enough to collect SS. The reason I bring up retiring BEFORE old enough to collect is it changes the math on the increase in the SS benefit by waiting longer: my increase will not be from putting more money into my SS account for more years (because I won't be working and putting into the SS account anyway). My increase will only be from holding off on starting the drain on my account (less years left in my expected lifetime = higher monthly payout).
For that reason, it's better for me to collect earlier rather than later because the increase in my SS check by holding off till 70 is not as much as the gain in my investments during those 8 years between 62 and 70 if living on my SS check means less withdrawn from investments during those years (more money stays invested to keep compounding).
Scratch everything I just typed if the decision to wait longer before collecting means still working during those years. That changes the math a lot on the SS check increasing.
Biggest Ponzi scheme ever.
Took mine at 62. I also have a small defined benefit retirement plan that I took as soon as I could, albeit at half of what I would have gotten if I waited until normal retirement.
My thinking was that I knew inflation was coming and I’d rather have the dollars before they shrank in size.
History is proving me to be right and although I’m now past the point where I would have gotten full benefits, I have never regretted either decision.
Some people know they are less likely to make it to 80 or 85. Diabetes, heart disease, family history of colon cancer. Some may decide after 40 years of working to go to part time and take a SS as a supplement. It really isn’t our business.
You can begin Medicare at 65…
I’m 52. What are the odds there will eve be benefits when I am at the full SS retirement age for me? Considering men in my family tend to live no more than 76 years old - I would likely not draw anywhere near what I put in by that age. My retirement age will be more at the mercy of what the markets do and how much I have managed to put back in retirement funds. So I predict I will be money ahead to start drawing as soon as eligible...
I plan to retire at the end of the year. I’ll be close to 71. But I wonder what I’ll do with my time.
So folks pay into the system in good faith and the goal posts get moved. Is this ‘great idea’ being brought to us by the same folks who brought us “ 2 weeks to lower the curve?” Asking for a friend.
I took it at 62. I’m not in the best health but doing ok. Hubby waited for full retirement age. We have the means outside of ss to live a good life. It is everyone’s choice what is good for them.
To expect people to wait until 67+ to collect SS is unrealistic.
Most companies start pushing out older workers as they reach near 60 and many companies will not hire older workers.
My advice for younger people is to pay your self first, learn to invest and be prepared to retire on your own dime by the time you are in your early 50’s as you may not have a choice.
“But a normal American? Suddenly the US Government becomes the model of fiscal responsibility.”
+100. Ain’t that the truth.
I waited until 70 to apply. I’m still working and paying in many years later.
My job was intensive high stress and I was faced with potential of having to do it 4 years longer to get the full retirement. I paid in the maximum SS for as long as I can remember. I chose early retirement and took the 25% hit.
It takes 12 years of getting SS for the extra money I got for the 4 years to balance out, so I’ve got two more years until SS is actually getting the benefit of that deal.
Paid cash for my house, no debt and my SS is more than enough for me.
Yeah, I did that. Maybe it wasn’t a good idea, as I didn’t need the money. However, the money from SS allowed me to increase my savings rate.
Social Security is a hug ripoff. They steal from you all of your life then tax you when you finally can draw it if you live that long.
Lower payout for longer time vs Higher payout for shorter time. That is the question.
I was involuntarily retired too young, but managed to get a (mostly) low stress job that generally pays better than SS would have at that point, and so far it has pretty well worked out. This job plays out, or a manager ticks me off, or if my health doesn’t hold out, then then I can always change my mind and start SS the next month. But unlike the author, I realize not everyone has options.
I still kept working though and didn't collect until almost age 66.
since govt workers of all stripes get a huge pension at early age, there is no reason why the rest of us shouldn't get our pittance at age 62....
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