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The majority of Americans are aware that they can claim Social Security benefits at any age, 62 to 70. Taking the benefit later in life will result in lower monthly checks but less. Many people are not aware that early retirement is a terrible decision.
This is the 50-year old solution to a problem that has been around for 50 years. It shapes how people will retire.
To give you some background, early retirement rules were first established in 1961 and extended in 1983 in response to the increasing retirement age. This feature has been added to Social Security in order to allow retirees to receive the same amount of lifetime benefits regardless of whether or not the traditional retirement timeline is followed. 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.”
Although early retirement is a great option, retirees must accept a decrease in their monthly benefit that will last a lifetime. Social Security Administration says that the benefits an individual receives over the course of a normal life will remain the same, regardless of when they apply at 62 or 67. In theory, the claiming date changes when you collect benefits — not how much.
This is the basic principle of early retirement: Retirement should last longer and be paid less annually.
This strategy is not working. Democratic legislators believe Social Security benefits must be extended. The problem is what they focus on, but the root cause of it. The cause of too few benefit checks is the large number who receive benefits before they are due. The average benefit claim was $1,635.95 in 2020. Average checks for early claims did not include penalties of $1,917.54.
Social security is designed to protect you from the high costs of long-term living. Early retirement, on the other hand, offers retirement money today in return for less future security. It is similar to buying a car faster and spending less on auto insurance.
This strategy has a downside: many retirees may regret their decision. Today’s average retirement age is 85. Today’s 85-year-old became eligible for benefits at 62, in 1997. In 1997, almost 70 percent took out the cash early to receive permanent cuts in their benefit levels. Democrats argue now that there should be a five-percent increase in benefits for those who have lost their benefits.
It is predictable that people will now be able to trade their future security in exchange for money. The National Bureau of Economic Research says that since 1968, there has been an increase of one percent in poverty among the older beneficiaries. This was due to the fact that poverty tended to concentrate on those with lower incomes.
The story actually gets worse because the “actuarial adjustments” have deteriorated over the decades since the last update. People are actually living longer. The reality is that early retirement reduces life expectancy. Research by the Center for Retirement Research shows that outdated actuarial calculations penalize retired people who claim before the age of 62, which amounts to about 10% or $120 each 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.
There is no solution. Giving people the choice to trade future security for money now isn’t clear thinking. There is also no reason to believe that Congress would be more vigilant in examining a new policy. Unsupervised laws for more than 50 years means that the policy will not be enforced.
Next year, 62 years old will reach early retirement. It is high time it retired.
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 todayFind out more.
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