I don’t know about you, but I find the following both depressing and scary. What are people thinking and no, it’s not because they have no choice. One thing this all means is that there will be growing pressure to increase Social a Security benefits (that will make Old Liz Warren happy).
Growing numbers of workers expect to rely heavily on Social Security as a major source of income in retirement, but almost three-quarters of current retirees are receiving reduced benefits, according to two new reports.
According to a recent Gallup survey, 36% of adults who are not yet retired expect Social Security to be a “major source” of retirement income. That figure is roughly 10 percentage points higher than a decade ago and higher than any response in the past 15 years.
Of course, the best way to maximize Social Security is to delay claiming benefits until “full retirement age,” which is climbing gradually to 67, or beyond. A person due to receive a benefit of $1,000 at a full retirement age of 66 would receive only $750 at age 62 (the earliest age at which most people can claim benefits) – and $1,320 at age 70.
But that math isn’t stopping many workers from claiming benefits early.
Among the 37.9 million Americans receiving Social Security retirement benefits as of December 2013, fully 73% were receiving reduced benefits “because of entitlement prior to full retirement age,” according to a new report from the Social Security Administration.
Relatively more women (75.4%) than men (70.3%) received reduced benefits.
The findings come at a time when the Social Security program itself is straining to meet demands and when many workers are anxious about the size of their nest eggs.
Currently, the Social Security Administration is tapping the interest on the program’s trust funds to pay beneficiaries and, soon, will begin drawing down the assets themselves. At the moment, the trust fund is scheduled to run out in 2033, after which Social Security recipients would receive about 75% of their benefits.
Against that backdrop, a recent Wells Fargo/Gallup survey found that only 28% of non-retired investors are very confident they will have enough savings at the time they decide to retire. An additional 48% are somewhat confident.
The latest Gallup survey concludes: “To the degree [workers’] savings are not sufficient to fund their retirement, [they] will have to make up the shortfall somehow. The guaranteed Social Security benefit is an obvious way to do that, if not by also seeking part-time work or scaling back their standard of living considerably.”