The oldest Baby Boomers began turning 66 this year -- the full-retirement age for collecting Social Security benefits -- but many are claiming their benefits early because of the troubled economy, poor job market and fears about potential changes to the retirement system.
Unfortunately for some retirees, the decision to claim their benefits early could cost them tens of thousands of dollars down the road.
Three out of four eligible area residents start taking Social Security retirement benefits early, even though for some people the decision will permanently reduce their lifetime payments and could cost retirees or their spouses some important income later in life, according to a Middletown Journal/Hamilton JournalNews analysis.
Social Security is the primary source of income for many older Ohioans and delaying benefits until the full retirement age or beyond increases the size of the monthly payments.
Ohioans who are in good health, intend to keep working, expect to live a long time and have spouses may want to delay claiming benefits because oftentimes it turns out to be a better financial decision in the long run, experts said.
"For some people it's worth taking early, like if you are unhealthy, you become unemployed or your investment returns are low or you really, really need income," said John Bowblis, assistant professor of economics and research fellow with Scripps Gerontology at Miami University. "But for the typical person, waiting until 66 is probably going to be a better solution."
Social Security retirement benefits are provided to people who have worked for at least a decade, and the payment amounts are based on workers' 35 highest earning years.
People can begin collecting Social Security benefits when they turn 62, but the full retirement age is 65 for people born in 1937 or earlier, and 67 for people born after 1960. Taking benefits before reaching the full retirement age reduces the size of the payments. People who retire at 62 will on average receive a monthly payment about 25 to 30 percent less than if they waited until their full retirement age.
Delayed benefits yield larger payout
Every case is different, but people who start receiving benefits earlier get smaller amounts because they are expected to receive more payments, and people who delay collections receive larger payments because they will receive fewer of them.
"It is a very individual decision, and what is the best route for one person is not the best route for another," said Theresa Busher, a Social Security Administration spokeswoman in Dayton.
Most people take their benefits early. About 131,827 of the 180,645 recipients of Social Security in Butler, Champaign, Clark, Greene, Miami, Montgomery and Warren counties began claiming retirement benefits at 64 or earlier, according to a December 2011 snapshot of recipients and benefits obtained by this newspaper. More than half of recipients in the seven-county region claimed their benefits as soon as they turned 62. In Ohio, about 73 percent of recipients claimed their benefits at 64 or younger.
Additionally, more Americans are taking the benefits early. In 2011, about 73.8 percent of the 35.6 million U.S. recipients of retirement benefits received reduced monthly payments because they took their benefits before reaching their full retirement ages, according to administration data. The share of recipients who received reduced payments for taking benefits early was up from 73 percent in 2006, 71.3 percent in 2000 and 68.4 percent in 1990.
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