How patience can pay off when it comes to applying for social security
How patience can pay off when it comes to applying for social security

How patience can pay off when it comes to applying for social security

The average social security check right now is just around $ 1,500, which is not exactly enough to live on for most people. So what can you do to increase that amount when you retire, without getting a job that pays a really high salary while you are still working?

There’s one thing, and for that matter, Marketplaces Nova Safo chatted with senior economics contributor Chris Farrell. Below is an edited transcript of their conversation.

Nova Safo: So… is it one thing?

Chris Farrell: Now … just wait!

Safo: OK, let’s start with the basics. When can you apply for social security?

Farrell: Social security is the economic basis for retirement in the United States. The earliest you can apply for pension benefits is 62 years old. The latest is 70 years old. You are rewarded for each year you wait. The benefit is about 76% higher if you apply at the age of 70 compared to the age of 62.

Safo: Most people do not wait until they are 70, right?

Farrell: The most popular age for application is 62. According to the Center for Retirement Research at Boston College, 34% of women and 31% of men who applied for retirement benefits in 2019 were 62 years old. That said, the long-term trend has been that fewer people have reported at that age. A small percentage are waiting for 70 years. There are no additional benefits after that birthday.

Safo: People who sign up early worry that they will die soon and they want to make sure they get something back from the payments they have made in the system while working?

Farrell: It is in many ways the core of the problem. But Social Security pays an inflation-adjusted benefit for life. It is basically a life insurance policy, which is especially important for women who tend to live longer but earn less over the course of their careers. Say it this way: You can survive your savings, but you can not survive your social security benefit. The higher return-to-wait is the reason why so many experts now recommend retirees to deduct income from part-time work or draw on their retirement savings first to make it convenient to defer the application for a few extra years, at least.

Safo: Although claiming early is the right choice for some people.

Farrell: Absolutely. This is very important. The ability to report early is crucial to the social safety net. A big reason to report early is poor health. People can, if they have to, quit their jobs to care for elderly parents. The core of the question of when to argue is how best to frame the discussion to help people make smart choices.

Safo: Behavioral economists have long emphasized that framing matters.

Farrell: I have been to conferences – that is, pre-COVID – where economists imbued with social security have called for a better framework. Here’s the basic idea: Standard counseling often starts with the earliest you can submit – age 62. The conversation ends with a note that you can delay up to 70 years. Why not turn the discussion around and start with the financial gains by waiting and ending with notes that you can file earlier if necessary? Same information, different frameworks and maybe a different claim result.

Safo: OK, but the social security funds are expected to be exhausted by 2034. Is not that an argument for applying early if you are qualified?

Farrell: Looking at, for example, Pew Research surveys over the years, a majority of people – Democrats and Republicans – suffer from Social Security. The financing deficit is easy to correct financially. Politics is difficult. My guess, and the best assessment of many social security experts, is to consider how critical social security is to economic security in old age, Congress will restore the system’s economic health – probably at the last minute.

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