Social Security, What Consumers Should Know

Eileen Ambrose,

AARP

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En español

Published September 16, 2016

Do you know the best age for you to begin claiming Social Security retirement benefits?

People applying for benefits aren’t consistently given key information from the Social Security Administration that they might need to make better-informed decisions about when to begin taking retirement benefits, according to a new government report.

The U.S. Government Accountability Office, an investigative arm of Congress, looked at why individuals tend to claim Social Security retirement benefits early and, as a result, get a smaller payment for life.

According to the GAO report, whether someone was applying for benefits online or face-to-face with a Social Security claims specialist, “claimants were sometimes provided information that could inadvertently influence them to claim earlier than they might have otherwise.”

The GAO says the Social Security Administration provides a lot of information about the program online and in publications, although it can’t be assumed people read or understand the material. In fact, surveys by AARP and other groups show that many consumers are unfamiliar with the workings of Social Security, which can lead them to make wrong decisions about when to start benefits, the GAO says.

For example, some individuals didn’t know that retirement benefits could be taxed or that their benefits could be temporarily reduced if they worked. Some were unaware that a wife or husband — even one who hasn’t worked — could be eligible for benefits based on the record of a working spouse. Some didn’t understand how benefits are calculated.

People generally knew that they could get a bigger retirement benefit if they delayed taking Social Security, but many didn’t know by how much. Taking retirement benefits at age 62 — the earliest possible age — instead of at your full retirement age (currently 66 for many) will reduce monthly benefits by 25 percent because you are collecting checks for more years. Plus, for every year beyond your full retirement age that you postpone benefits, your payment will go up by 8 percent until age 70.

Yet, according to the GAO, more than 4 out of 10 men — and nearly half of women — start retirement benefits at 62. Only 2 percent of men and 4 percent of women waited until 70 to claim benefits.

The GAO observed 30 face-to-face interviews across the country in the past year between consumers applying for benefits and Social Security claiming specialists.

Social Security claims specialists are supposed to explain to consumers the advantages and disadvantages of filing an application, but not give advice. Yet in some cases, the GAO says, it found specialists making suggestions that encouraged consumers to take benefits early.

The GAO made several recommendations to the Social Security Administration to improve the benefit claiming process. Among them, Social Security claims specialists should:

Provide basic information on life expectancy and the financial risks of longevity that could affect when a consumer claims benefits.
Inform consumers that payments will be bigger if they delay benefits, and offer to estimate what the consumer’s benefit will be at age 62, at full retirement age and at 70.
Tell consumers that benefits are determined by the highest 35 years of earnings and that additional work can boost benefits.
Explain how benefits can be temporarily reduced if a person under their full retirement age continues to work. The benefit will be recalculated later to increase the payment at full retirement age.