By collecting benefits before their normal retirement age, nearly three-quarters of all current Social Security recipients are receiving reduced benefits and limiting their retirement security.
That was the theme at Tuesday's National Retirement Planning week webinar, focused on educating financial advisors to help their clients more effectively maximize their Social Security benefits plan.
"Deciding when to begin collecting Social Security benefits needs to be considered within the framework of a holistic retirement strategy," said Cathy Weatherford, IRI president and CEO. "As the retirement paradigm continues to shift and as workers bear more responsibility for their overall retirement protection, the decision of when to collect benefits assumes an even higher level of importance. By working with a financial professional, Boomers can consider all the factors and prudently decide how to maximize their retirement security."
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Those collecting Social Security at age 62 will reduce their benefits by 20 to 30 percent depending on their normal retirement age, which could amount to hundreds of thousands of dollars in lifetime payouts, according to Chad Terry, director of investment and retirement education for BlackRock, who led the webinar.
For this reason, he said that it is critical for clients to learn about timing issues and understand all their options. Terry said that clients, when evaluating when to collect Social Security, should assess their retirement income sources, health condition, longevity expectations, and plans for future employment. Spousal considerations also must be weighed.
Considering spousal benefits is of particular importance for women, who are more likely to take time out of the workforce and tend to have lower career-long earnings. This reduces their Social Security benefit levels.
As a result, and as women tend to live longer and outlive their spouses—they often collect survivor benefits based on their husbands' benefit levels. Statistically women are more dependent on Social Security, particularly at advanced ages, and thus the age at which their spouses collect Social Security benefits significantly affects their own retirement protection.
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