Want an extra $200,00 for retirement?
According to researchers from Atlanta Fed, led by David Altig, noted Boston University economist Laurence Kotlikoff and Victor Yifan Ye, also of Boston University you just need to wait to take retirement. With 90% retiring before age 70, they potentially leave that money on the table.
While social security benefits can be claimed at 62, people get 30% less by taking it so early.
Using a tool from Kotlikoff’s Economic Security Planning and inputs from the Federal Reserve’s survey of consumer finances, the group discovered their results. This tool takes advantage of all major federal and state tax and transfer programs. Their findings are alarming for many Americans.
Their findings indicate that by waiting the median boost to households is $182,370 or 10.2%. A median reduction in income by waiting is $2,714. For many, this kind of shift isn’t peanuts, and as savings and benefits are quickly losing ground due to inflation, this kind of extra money can be huge in enjoying their golden years.
“Young, as well as older workers, can gain from postponing Social Security benefit collection. Such delay does, however, come at a higher cost – far more workers becoming cash-flow constrained. On the other hand, the typical temporary living standard reduction is small,” said the group.
Naturally, they also looked at the financial impact of optimizing the benefits from the US Government. If all Americans did this, the present value of lifetime benefits would rise by 6%, or $3.4 trillion. Should future generations do the same, another $3 trillion in costs would be incurred.
This kind of information is something the government has long been banking on Americans not knowing. By not having to wait to pay out, they can manipulate the system more, and keep more of your hard-earned money, and your contributions to social security. For decades, they have been playing games and funding special interests with your social security.
Waiting to cash out isn’t without its risks, though. For many, the fear of death before 70 makes the idea of retiring as soon as they can very palpable. Given the increase in vaccines thanks to COVID and monkeypox, the government is betting on many of us not making it long enough t collect this money. For those who can wait it out, the rewards are clear and great.
On the flip side of the coin, as it sits right now, many cannot afford to retire. The meager social security checks are all they have to keep them alive going forward, and by staying on they can build up a bit of extra savings to make up for the drop in income by going to social security. Paying off debts along the way and trying to simultaneously build extra memories with family is not an easy feat, but many are trying it. Being “forced” into getting more by retiring later is a blessing in disguise for many.
Even if you don’t “need” to wait, you must ask yourself harsh questions about retirement. If you retire at 62 (or any age before 70 really), will you be able to maintain your current lifestyle? Is there breathing room in your budget for unexpected expenses, inflation, or the potential of yet another “pandemic” infiltrating the country? Being honest about your retirement goals, being properly prepared, and having things set up to achieve happy retirement are crucial.