LEAWOOD, Kan., Oct. 31, 2012 /PRNewswire/ -- The BMO Retirement Institute today issued a national report which found that Kansans delay drawing down Social Security benefits longer than most Americans, and are generally more knowledgeable about spousal benefits. However, they may still not be maximizing their Social Security benefits, due to a lack of understanding around key issues.
The report, Retirees Not Maximizing Social Security Retirement Benefits, revealed that many retirees are taking their benefits too early and many are perhaps not aware of options and strategies to yield higher benefits.
"Today people are living longer, health care costs are rising and there are fewer defined benefit pensions, and combined that means Social Security could play an even bigger role in ensuring the next wave of senior citizens feel secure during their retirement," said Kelli Glynn, Kansas City Managing Director, BMO Private Bank. "It's important that retirees do their due diligence and speak with a professional so they can make informed decisions and maximize their benefits. After all, if you paid into the program for all those years, why not take full advantage of it?"
Timing Affects Dollars
When to take Social Security can have an impact that can last a lifetime, the report noted. 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 Kansas residents understood that waiting longer increases the monthly amount they will receive, 44 percent admitted they are currently collecting or planning to collect before full retirement age.
- An overwhelming 43 percent of Kansas residents expect they will have to delay their retirement and then work part-time during retirement, compared to the national average of 29 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 Social Security:
- Too many decisions: When to retire, how much to spend and how to invest savings all influence when a person decides to begin collecting Social Security benefits. Yet too many decisions as retirement nears can lead to confusion, pushing many people to take Social Security early by default.
- Lack of knowledge: More than half (53 percent) of Kansans are not knowledgeable about general strategies to maximize Social Security benefits and 54 percent have not actively looked for information. Fifty-nine percent have not conferred about collecting Social Security with anyone at all.
- Will Social Security survive?: Is Social Security running out of money? Eighty-three percent of Kansans 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 related to retirees is how retirement affects their spouse. The report found that not all retirees in Kansas are fully aware of all their options:
- Sixty percent of Kansans are knowledgeable about spousal benefits, the highest percentage across the country, compared to the national average of 51 percent.
- Still, more than half (53 percent) are uninformed about widow benefits.
Being uninformed means that many retirees could be missing out on thousands of dollars every year because, 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 advises 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 47 percent of Kansans have a financial plan, slightly lower than the national average of 54 percent, yet 69 per cent of retired Kansans said they would urge other pre-retirees to make a financial plan. Their biggest piece of advice, as indicated by 90 percent of Kansan respondents, would be to plan well for health and long-term care.
"It's extremely important for retirees to educate themselves on the various aspects of Social Security to maximize their benefits and make the most of their personal situation," said Glynn. "That means seeking expert advice, and drafting a financial plan that incorporates all retirement income sources to ensure a comprehensive roadmap towards 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