PHOENIX, Oct. 31, 2012 /PRNewswire/ -- The BMO Retirement Institute today issued a national report which found that retirees in Arizona do not understand many of the key issues surrounding Social Security and, as a result, could be losing a significant amount of money to fund their retirement.
The report, Retirees Not Maximizing Social Security Retirement Benefits, revealed that many retirees are taking their benefits too early and are not clear about the options and strategies available to maximize their benefits.
"Life expectancy and the cost of living continue to rise, and the stock market continues to be volatile," said Matt Miller, Arizona Managing Director, BMO Private Bank. "That gives Social Security an even bigger role to play in ensuring that many seniors have the income they need in retirement. Retirees need to understand their options and seek professional financial advice so they can make informed decisions and maximize their benefits."
Timing Impacts Dollars
The report noted that the timing for starting to receive Social Security benefits has an impact that can last a lifetime. For example, if you begin to receive your Social Security payments as early as age 62, you will receive a reduced dollar amount for life; while waiting until full retirement age or beyond yields a higher amount for life. However:
- While 90 percent of Arizona residents understood that waiting longer increases the monthly amount they will receive, 52 percent admitted they are currently collecting or planning to collect before full retirement age.
- Couples are particularly vulnerable – a claim impacts both spouses for their combined lifespan and can significantly affect spousal and widow benefits.
The report also revealed several issues that influence when people begin taking their Social Security payments:
- Too many decisions: When to retire, how much to spend and how to invest savings all affect when a person decides to collect Social Security benefits. Yet having to make so many decisions as retirement nears can be confusing, prompting many people to take Social Security early by default.
- Lack of knowledge: Nearly half (45 percent) of Arizonans don't know about general strategies to maximize Social Security benefits, and 57 percent have not actively looked for information. Two-thirds (68 percent) have not spoken to anybody about collecting Social Security benefits.
- Will Social Security survive?: Is Social Security running out of money? Eighty-one percent of Arizonans have concerns about its viability, even though most studies show Social Security should be solvent well into the 2030s.
Spouses Have Rights Too
Another important subject for retirees is how retirement affects their spouse. The report found that not all retirees in Arizona are fully aware of all their options:
- Just half (52 percent) of Arizonans are knowledgeable about spousal benefits
- Interestingly, 42 percent of Arizonans say they are not very likely to apply for spousal benefits – the largest proportion in the country
- Half (50 percent) are uninformed about widow benefits.
Being uninformed means that many retirees could be missing out on thousands of dollars every year. 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 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. Benefits should be discussed with a financial professional as part of a wider strategy, just like investments, said the report.
Only 44 percent of Arizonans have a financial plan, slightly lower than the national average of 54 percent, yet 68 percent of retired Arizonans said they would urge other pre-retirees to make a financial plan. Three-quarters (73 percent) of Arizonans would urge others to understand how their benefits are calculated.
"Arizona's retirees need to make sure they understand the various aspects of Social Security to maximize their benefits and do what is best for their personal situation," said Miller. "Seek expert advice, and draft a financial plan that incorporates all retirement income sources to ensure a comfortable lifestyle down the road."
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