Lack of Social Security Awareness Could Be Costing
Retirees Thousands of Dollars
Half collecting or planning to collect benefit before
full retirement age; more than half not knowledgeable about maximizing
benefits; 83% concerned about program
31, 2012 Many older retired Americans do not understand key issues
surrounding Social Security, says the BMO Retirement Institute.
Consequently, they are losing out on a significant amount of money that
could be used to fund their retirement.
Retirees Not Maximizing Social Security Retirement Benefits,
revealed that many retirees are taking their benefits too early and are
not necessarily aware of options and strategies that may result in
higher benefits. Many others, too, have pointed out it is a mistake for
many seniors to take the early retirement benefit offered by Social
"With factors such as the volatile stock market,
longer life expectancy, rising health care costs and fewer defined
benefit pensions, Social Security may play an even bigger role in
ensuring retirement security for the next wave of retirees," said
Stephen Williams, Vice President, U.S. Financial Planning Strategy, BMO
"It's vital that retirees do their research and
seek out expert advice so they can make informed decisions to maximize
their benefits. After all, they paid into the program why not take
full advantage of it?"
Timing Impacts Dollars
The report noted that the decision about when to
take Social Security has an impact that can last a lifetime. For
example, claiming Social Security as early as age 62 means receiving a
reduced dollar amount for life; meanwhile, waiting until full retirement
age or beyond yields a higher amount for life. However:
● While 91 percent of respondents understood
that waiting longer increases the monthly amount they will receive,
almost half admitted they are currently collecting or planning to
collect before full retirement age.
● Couples are particularly vulnerable since a
claim impacts both for their combined lifespan and can significantly
affect spousal and widow benefits.
The report also revealed several factors that
influence when people begin taking Social Security:
● Too many decisions: When to retire, how
much to spend and how to invest savings all should affect when a person
decides to collect Social Security benefits. However, since so many
decisions take place at retirement it appears that too many options can
result in confusion and paralysis, pushing many people to take Social
Security early by default.
● Lack of knowledge: Half of Americans
(52 percent) are not knowledgeable about general strategies to maximize
Social Security benefits and 62 percent have not actively looked for
information. Sixty percent have not discussed their Social Security
decision with anyone.
● Will Social Security survive?: Is
Social Security running out of money? An overwhelming 83 percent of
Americans have concerns about its viability, yet most studies show
Social Security is solvent well into the decade of 2030.
Spouses Have Rights Too
Another area where retirees struggle is how
retirement affects their spouse. The report found that retirees are not
fully aware of all their options:
● Almost half (49 percent) of respondents admit
they are not knowledgeable about spousal benefits.
● Fifty-six percent are uninformed about widow
This lack of knowledge means that many could be
missing out on thousands of dollars annually, since under Social
Security rules, a person can receive up to 50 percent of a spouse's
benefit and a widow can receive 100 percent of a deceased spouse's
A Financial Plan Can Help Ensure Social Security
The BMO Retirement Institute encourages retirees to
make Social Security benefits part of a financial plan that includes
other sources of income. Benefits should be discussed with a financial
professional as part of a wider strategy, just like investments.
The report revealed that only 54 percent of
retirees have a financial plan, while only 42 percent of those aged
45-54 have one. Additionally, 69 percent of those already retired said
the advice they would give to pre-retirees is to make a financial plan.
"Retirees should educate themselves on the various
aspects of Social Security and get advice on what's best for their
particular situation," said Williams. "And be sure to draft a financial
plan that incorporates Social Security benefits along with other
retirement income sources to provide a comprehensive roadmap for
covering lifestyle needs, wants and wishes."
>> Sources for all data and findings referenced in
this release can be found in the report.
>> BMO and BMO Financial Group are trade names used by
Bank of Montreal. Estate planning requires legal assistance which Bank
of Montreal and its affiliates do not provide. Please consult with your
>> About the BMO Retirement Institute
The BMO Retirement Institute, a part of BMO Financial Group, was
established in 2008 to provide thought-provoking insight and financial
strategies for individuals planning for, or currently in, their
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