As a result of the recession, social security retirement and disability benefit claims have risen 50% more than expected.
reports that the 150,000 extra retirees claiming benefits may add to the financial pressure on the entitlement program and that expenses would exceed revenue beginning in 2016, with the social security fund running out of money in 2037, four years earlier than their previous forecast.
People have always used early Social Security benefits as a safety net during recessions. This could be because they have been unemployed for an extended period of time or don't want to go to back to school to train for a new career. They may also be facing heaving debt burdens that make them dip into their benefits earlier than planned.
But many thinking of claiming social security should carefully consider this choice, because the longer term costs could easily outweigh the short term benefits. According to the NY times, studies have shown that delaying your claim to social security benefits can results in higher payments down the road, but the majority of people don't follow that advice, choosing instead to start benefits early. Why wait to collect what is rightfully yours?
That logic may sound reasonable now. But in reality, the bigger risk is that you will live to a ripe old age. If you can wait, think of the money you aren't receiving during that period as a payment of sorts for an annuity that will pay a higher, guaranteed stream of income later, if you live a long time (or at least longer than your savings last), financial experts say. You can claim Social Security any time from age 62 to 70, but the longer you wait, the larger your monthly check. And many people come out way ahead if they wait at least until their full retirement age, which is different from the day you stop working for good. For people born 1943 to 1954, full retirement age is 66, and it creeps up for younger people.
What do you stand to lose by taking benefits early? Take those who are set to receive $1,000 a month at their full retirement age. If they sign up for benefits at age 62, they will collect only $750. But if they wait until 70, they will earn extra credit and receive up to $1,320 a month — nearly a third more! For people who choose to defer benefits until age 66, it generally takes about 12 more years to collect as much as if you started getting checks at 62. So you break even, so to speak, about age 78, according to Avram Sacks, a Social Security law analyst for CCH, a tax and accounting information service.
