A bipartisan group of Senators is spearheading an effort to draw attention to Social Security’s shortfalls and to help retirees better determine when to claim benefits.
Comprised of Sens. Bill Cassidy (R-LA), Chris Coons (D-DE), Susan Collins (R-ME) and Tim Kaine (D-VA), the lawmakers on March 6 introduced legislation (S. 664) and released a letter to the Social Security Administration (SSA), contending that Americans approaching retirement are confused about their claiming options and that the SSA needs to be a better job at explaining the options.
“When to claim Social Security benefits is a critical decision for older Americans planning their retirement,” the senators state in their letter to the SSA, adding that, “Most people, however, do not claim benefits at the age that would maximize their income in retirement, usually because they claim too early.”
Consequently, they argue that the SSA “should take more proactive measures to provide Americans with the tools and resources to determine how best to set themselves and their families up for financial security in retirement.”
Social Security recipients can begin claiming benefits as early as age 62, but doing so locks in benefits at a much lower rate than claiming at normal retirement age (ages 66 to 67 depending on their date of birth) or even waiting until age 70. According to the senators, many Americans are unaware at the overall impact of claiming early.
Citing data from the SSA, they further note that age 62 remains the most frequent claiming age for almost 35% of men and 40% of women. In addition, citing a study from United Income, the senators note that, collectively, retirees stand to lose up to $3.4 trillion—or $111,000 per household—by claiming Social Security early.
As part of their legislation, the senators advocate for changing the terminology for how the claiming options are presented. Instead of using terms such as “early eligibility age,” “full retirement age,” and “delayed retirement credits,” the SSA should use terms such as “minimum benefit age,” “standard benefit age,” and “maximum benefit age."
The bipartisan group is also calling on the SSA to bring back paper statements. Under this change in their legislation, all working Americans would receive updates on how much in benefits they may receive at ages 62 to 70, along with an explanation of their options every five years once turning age 25, with the frequency increasing to every two years starting from age 55 and annually from age 60.
While many have valid reasons for claiming early, such as being unable to work, others may claim at the earliest possible time because they are unaware of the advantages of waiting, the senators explain. To that end, the lawmakers ask the SSA to analyze why so many Americans claim benefits early and to outline its plans to “educate the public about the trade-offs of early versus delayed claiming.”
Another possible reason that Americans are claiming Social Security early may have to do with the uncertain future of the programs. The latest Social Security trustees report shows that the asset reserves of the Old-Age and Survivors Insurance (OASI) Trust Fund is projected to become depleted in 2034. If Congress does not act before then, there would be sufficient income coming in to pay only 77% of scheduled benefits at that time.
In the meantime, there are additional, ongoing discussions taking place between Sens. Cassidy and Angus King (I-ME) to “preserve and protect Social Security.” A March 3 statement from the pair provides an update on where their discussions stand, noting that the Social Security trust fund will be insolvent in less than a decade, and if Congress does nothing, current law requires a 24% cut to benefits.
“Addressing this existential threat is a complicated math challenge and we are hearing out all possible pieces of that equation — like Ronald Reagan and Tip O’Neill did in 1983 — and leaning on a proven financial model to do so,” Sens. Cassidy and King note. They add that, “There are dozens of considerations being weighed to protect Social Security, including locking early retirement at 62, an ironclad protection for lower-wage workers, and seeking avenues to increase benefits immediately. Under what we are discussing, millions would immediately receive more, and no one would receive less.”
“These conversations are ongoing, and we welcome feedback and additional components,” the senators further note, adding that, “As soon as we have a fully developed plan, we’ll release it for discussion and debate.”
Social Security is also a hot-button topic in the ongoing debt ceiling debate and whether it or other programs should be cut to help lower the deficit. Still, other lawmakers are looking to increase Social Security benefits, shore up program funding and increase taxes on upper-income taxpayers to offset the cost.