Market Overview

BMO Retirement Institute Report: Half of Minnesotans Unfamiliar with Key Rules around Social Security

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- Almost half of Minnesotans are currently collecting or planning to collect Social Security before full retirement age

- Half are not knowledgeable about strategies to maximize benefits- including when to begin collecting benefits and how spouses are impacted

- Eighty-four percent are concerned about the future viability of Social Security

- Minnesotans lead the nation in having a financial plan prepared by a financial advisor rather than by a friend or relative

- Social Security benefits should be part of a financial plan that includes other sources of income

MINNEAPOLIS and ST. PAUL, Minn., Oct. 31, 2012 /PRNewswire/ -- According to a national report issued today by the BMO Retirement Institute, half of Minnesotans are unfamiliar with how to maximize their Social Security benefits.  This is putting many in the state at risk of potentially leaving tens of thousands of dollars in benefits on the table that could be used to help 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 necessarily aware of options and strategies that may result in higher benefits.

"An increasing number of Minnesotans are relying on Social Security benefits as their primary source of income in retirement," said Steve Marsich, Senior Vice President BMO Private Bank, Minnesota. "This has made it that much more critical for people to familiarize themselves with the rules of the program and determine what strategies are available to them to maximize benefits." 

Timing of When You Claim Benefits Matters

The report notes that 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 91 per cent of Minnesota respondents understood that waiting longer increases the monthly amount they will receive, 47 percent admitted they are currently collecting or planning to collect before full retirement age.
  • Couples in the state are particularly vulnerable since a claim impacts both for their combined lifespan and can significantly affect spousal and widow benefits.

Influencing Factors

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, it appears that too many options leading up to retirement can result in confusion and paralysis, pushing many people to take Social Security early by default.
  • Lack of knowledge: Half (52 percent) of Minnesota residents are not knowledgeable about general strategies to maximize Social Security benefits and 64 percent have not actively looked for information. Sixty-two percent have not discussed their Social Security decision with anyone.
  • Will Social Security survive?: Is Social Security running out of money? An overwhelming 84 percent of Minnesotans have concerns about its viability.

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:

  • Half (53 percent) of Minnesota respondents admit they are not knowledgeable about spousal benefits.
  • Sixty-one percent are uninformed about widow benefits.

This lack of knowledge means that many could be losing 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 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. Fortunately, 58 percent of Minnesotans have a financial plan, slightly higher than the national average of 54 percent and well above the other states polled. They are also most likely (71 percent) to have the plan prepared by a financial advisor rather than by a relative, friend or accountant or by themselves. Not surprisingly, 76 percent of retired Minnesotans - the highest percentage across the country - 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 individual situation," said Mr. Marsich. "And they should definitely draft a financial plan that incorporates all retirement income sources to provide a comprehensive roadmap for the lifestyle they would like when they retire."

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 Harris Bank

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