11% of Retirees Plan to Maximize Social Security, Ep #265

Why don’t more people maximize their Social Security benefits? As a financial advisor, I often wonder at the surprisingly low percentage of people who choose not to optimize their Social Security benefit.

Today’s retirement headline dives into that question in further detail by analyzing a study with plenty of data. Listen in to learn when many people choose to take Social Security and their reasons for making their decision.

Why don’t more people maximize their Social Security benefits? Click To Tweet

Outline of This Episode

[1:42] When people plan to take Social Security and why
[7:26] 55% didn‘t think they would be able to replace three-quarters of their last paycheck amount in retirement income
[10:40] How should a new retiree fill their cash reserve bucket when stocks and bonds are down?

Only 11% of prospective retirees plan to receive their maximum benefit

When the best time is to take Social Security is a common question among those getting ready to retire. Although most people are aware that the longer they wait the higher their monthly benefit will be, most choose not to wait longer to receive their maximum benefit amount. Many people even choose to take Social Security early, reducing their benefit 5% each year prior to their full retirement age.

ThinkAdvisor.com recently published an article that studied the results of a recent survey of 1,000 individuals who have a median income of $75,000 and that fall between the ages of 45-75.

Even though delaying Social Security is a surefire way to generate more income in retirement, few retirees are actually prepared to take this path. Of the respondents, only 11% are planning to wait until age 70 to reach their maximum monthly benefit.

Even though delaying Social Security is a surefire way to generate more income in retirement, few retirees are actually prepared to take this path Click To Tweet

Why don’t people wait to maximize their benefit?

Almost half of the participants plan to take their benefit before the full retirement age. Almost ⅓ of study participants choose an earlier start date because they feel that they will need the money sooner.

As we have seen before in the Prudent Pessimist episode, one of the main reasons that people choose not to wait to file for Social Security is that they are worried that the Social Security fund will run out of money. Listen in to learn why this won’t happen.

Almost a quarter of those aged 60-65 had no idea how much money they will need to comfortably live in retirement. Click To Tweet

Many prospective retirees aren’t financially ready to retire

Even more worrisome is the fact that many people are not ready to replace their income in retirement. 55% of the survey participants didn’t think they would be able to replace 75% of their last paycheck amount in retirement income. Most did not feel they would need to do so. Even more concerning was that almost a quarter of those aged 60-65 had no idea how much money they will need to comfortably live in retirement.

More than half of the respondents worry about living without a guaranteed paycheck from employment and almost half of retirees don’t have an income-generating strategy and simply withdraw money as needed.

These concerns can be alleviated by proper planning. You may need to get creative when planning how to turn on an income source in retirement. However, planning ahead will ensure help you rest easy and make the most of your retirement.

If you know someone who could benefit from the information we cover in this show, share it with them. You may end up encouraging them to consider retirement planning in a new way and improving their life.