BMO Retirement Institute Report: Floridians Draw Social Security Sooner Than National Average
They may be unaware of the long-term consequences of early distribution
- Almost half of Floridians expect to collect Social Security benefits at age 62, well above the national average of 30 percent
- Close to half are not knowledgeable about strategies to maximize benefits - including when to begin collecting benefits and how spouses are impacted
- Almost three-quarters of Floridians are concerned about the future viability of Social Security
- Social Security benefits should be part of a financial plan that includes other sources of income
NAPLES, Fla., Oct. 31, 2012 /PRNewswire/ -- The BMO Retirement Institute today issued a national report which found that many retirees in Florida begin drawing Social Security benefits before full retirement age and may lack understanding of how decisions about this and other key issues surrounding Social Security can affect their lifetime retirement earnings.
The report, 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.
"Rising health care costs, longer life expectancy, and fewer defined benefit pensions mean Social Security could play an even bigger role in ensuring the next wave of retirees feel secure in their retirement," said Jack Kuhn, Florida Managing Director, BMO Private Bank. "It's critical that retirees research their options and get 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 Affects Dollars
The decision about when to begin taking Social Security can have 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, while waiting until full retirement age or beyond yields a higher amount for life. However:
- While 93 percent of Floridians understood that waiting longer increases the monthly amount they will receive, 62 per cent admitted they are currently collecting or planning to collect before full retirement age.
- Further, 47 percent expect to collect it at age 62, well above the national average of 30 percent.
- 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 their 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. Yet too many decisions to make as retirement nears can result in confusion and paralysis, pushing many people to take Social Security early by default.
- Lack of knowledge: Almost half (48 percent) of Floridians are not knowledgeable about general strategies to maximize Social Security benefits and 50 percent have not actively looked for information. Fifty-two percent have not discussed their Social Security decision with anyone.
- Will Social Security survive?: Is Social Security running out of money? Seventy-three percent of Floridians 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 affecting retirees is how retirement affects their spouse. The report found that retirees are not fully aware of all their options:
- 47 percent of Florida respondents admit they are not knowledgeable about spousal benefits.
- Fifty-four percent are uninformed about widow benefits.
This lack of knowledge means that many could be missing out on thousands of dollars annually, since Social Security rules allow a person to receive up to 50 percent of a spouse's benefit and a widow to receive 100 percent of a spouse's benefit.
A Financial Plan Can Help Ensure Social Security Success
The BMO Retirement Institute encourages retirees to make Social Security benefits part of a financial plan that includes other sources of income. It recommends discussing benefits with a financial professional as part of a wider strategy, just like investments. Forty percent of Floridians do not have a financial plan, slightly lower than the national average of 43 percent. Still, 74 percent of Florida-based retirees said the advice they would give to pre-retirees is to make a financial plan.
"Retirees must educate themselves on the ins and outs of Social Security and get advice on what's best for their individual situation," said Kuhn, who is also a Certified Financial Planner. "It's also wise to draft a financial plan that incorporates all retirement income sources, ensuring a comprehensive roadmap for a comfortable future."
To view a copy of the full report, please visit: www.harrisbank.com/retirementinstitute
*Sources for all data and findings referenced in this release can be found in the report at www.harrisbank.com/retirementinstitute
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 legal advisor.
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 retirement years.
SOURCE BMO Financial Group