Maximizing Social Security benefits

By U.S. Sen. Susan Collins
(R-Maine)

If someone offered me $100 today, no strings attached, I’d be tempted to accept it and say thank you. But, if I were told that if I just waited until next week, I could receive $200 instead — I think most of us would agree that it might make sense to wait

This example is oversimplified, but essentially, this is how our Social Security system works for those who qualify for retirement benefits. Deciding at what age to begin claiming Social Security retirement benefits is the single most important financial decision that many Americans will ever make. Few, however, understand that making the wrong choice can end up costing them tens of thousands of dollars, or more, during their retirement years.

As chairman of the Senate Aging Committee, one of my priorities is improving the retirement security of the American people. Social Security benefits make up the largest component of retirement income for the majority of American households, so it is vital to ensure that seniors have the accurate, clear and consistent information they need to fully understand the Social Security rules that govern their decisions on when to begin receiving these benefits. This important issue was the subject of a recent Committee hearing that I chaired.

Retirees are entitled to claim benefits as early as age 62, and for many retirees, that makes sense; either they’re in poor health, or their jobs are too physically demanding for them to continue to work. But those who are able to work and nevertheless claim their benefits at age 62 will see their annual benefits permanently reduced by nearly one-third compared to what they could have received by waiting until they’re older. In fact, benefits can go up by eight percent annually for each year that seniors delay claiming benefits, up to the age of 70.

For example, the average person in Maine, earning $42,000 a year, would receive about $1,200 a month from Social Security if he or she retired when they first became eligible at age 62. But if this person is able to keep earning a paycheck until the age of 66, he or she could then receive $1,600 a month in Social Security retirement benefits. And, if the person remains in good health, can work, and is fortunate enough to be able to wait until age 70 to begin claiming benefits, this senior could receive a check for $2,112 a month. That’s nearly $1,000 more each and every month — $12,000 more every year than if the senior had started receiving benefits eight years earlier.

I am concerned that many Americans may be unfamiliar with this aspect of the Social Security program, leading some of them to make a costly mistake. In March 2015, Senator Claire McCaskill and I requested that the Government Accountability Office, Congress’ investigative arm, study ways in which the Social Security Administration can improve and clarify the information it provides to eligible individuals to help ensure that they have a complete understanding of the factors that will affect their retirement benefits. The GAO released its study for the first time at our hearing, along with six recommendations on ways the Social Security Administration can improve the information it provides to seniors

The GAO found that many individuals do not fully understand key details of Social Security’s rules that can affect their retirement benefits. Nor do they understand how spousal and survivor benefits are determined. Many may not realize just how long their financial assets may need to last. For example, a 65-year old today can expect to live for another 20-25 years, and one in four will live past age 90.

As the GAO report details, the Social Security Administration does make a great deal of information available to the public. Unfortunately, this information is not always easy to digest, and is sometimes conflicting. The six recommendations focus on better ensuring that Social Security field offices consistently provide the information that claimants need to make well-informed decisions about their benefits.

Our nation faces a retirement crisis. The simple fact is that far too many Americans have not saved enough money to live comfortably in retirement. Many of these retirees will rely on Social Security for nearly all of their income. For them, a Social Security check that is at the maximum level for which they are eligible could make the difference between a secure retirement and living in poverty.

I am hopeful that the GAO’s report, and our committee’s focus on this issue, will encourage the Social Security Administration to take additional steps to present essential information that seniors need, in a clear, easy to understand manner, so that they can make the best possible decision for themselves.