Wednesday, August 03, 2016

Who Claims Social Security at Age 62?

Are those who claim Social Security benefits early—at age 62—and receive a reduced benefit for life better or worse off than those who wait? That question was posed by the Center for Retirement Research in an analysis of data from the Health and Retirement Study. The answer: those who claim at age 62 are a mixture of the "disadvantaged," described as those with little education and poor job prospects, and the "advantaged" who have at least some college and more financial resources such as defined-benefit pension plans. The results of the study show...

  • Most Americans have gotten the message and are waiting to claim Social Security, which will boost their retirement income. The percentage of households claiming Social Security at age 62 has fallen from 52 percent among the cohort of beneficiaries born in 1931-36 to 47 percent among those born in 1942-47. 
  • Despite the decline in early claiming, nearly half of households still claim early. And the 66 percent majority are not prepared for retirement, the study finds—meaning their projected retirement income is not high enough to meet the recommended replacement rate. About 80 percent of the disadvantaged are unprepared. Among the advantaged, a smaller 40 percent are unprepared because many have the additional stable income provided by a defined-benefit pension plan.

"The results are discouraging," say the researchers, because they reveal the importance of defined-benefit plans to retirement preparedness. "These plans may persist in the public sector, but are not coming back in the private sector. The challenge is whether 401(k)s can be enhanced enough to fill that gap."

Source: Center for Retirement Research at Boston College, Are Early Claimers Making a Mistake?

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