BMO Retirement Institute Report: Hoosier Retirees Lack Knowledge of Social Security - and It Could Be Costing Them
-- Half of Hoosiers are currently collecting or planning to collect Social Security before full retirement age
-- More than half do not know strategies to maximize benefit, including when to begin collecting benefits and how spouses are impacted
-- Majority of Hoosiers 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
INDIANAPOLIS, Oct. 31, 2012 /PRNewswire/ -- Many Hoosier retirees do not understand core aspects of Social Security and, consequently, are losing out on a significant amount of money that could be used to fund their retirement, according to a national report issued today by the BMO Retirement Institute.
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.
"There are several factors that can affect retirement security, such as uncertain financial markets, longer life expectancy, rising health care costs and fewer defined benefit pensions. Because of these issues, Social Security may play an even bigger role in retirees' futures," said Chad Cassinelli, Senior Vice President and Managing Director, BMO Private Bank, Indiana. "It's important that retirees do their homework and speak to a professional so they can make decisions that will maximize their benefits. After all, they paid into the program – why not take full advantage of it?"
Timing Affects Dollars
The report mentioned 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 90 percent of Hoosiers understood that waiting longer increases the monthly amount they will receive, half admitted they are currently collecting or planning to collect before full retirement age.
- This is especially important for couples since a claim impacts both for their combined lifespan and can significantly affect spousal and widow benefits.
Other Important Factors
The report also revealed several aspects 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 Hoosiers (54 percent) are not knowledgeable about general strategies to maximize Social Security benefits and 68 percent have not actively looked for information. Sixty-nine percent have not discussed their Social Security decision with anyone.
Will Social Security survive?: Is Social Security running out of money? An overwhelming 88 percent of Hoosiers 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:
- Half (54 percent) of Hoosiers admit they are not knowledgeable about spousal benefits.
- Sixty-three percent are uninformed about widow benefits.
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 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. The report revealed that only 49 percent of Hoosiers have a financial plan, compared with 54 percent of Americans in general. Additionally, 61 percent of Hoosiers 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 Cassinelli "We stand ready to help clients draft a financial plan that incorporates all retirement income sources to provide a comprehensive roadmap for all kinds of goals."
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