BMO Retirement Institute Report: Lack of Social Security Awareness Could Mean Missouri Retirees are Missing Out on Thousands of Dollars
- More than half of Missourians are currently collecting or planning to collect Social Security before full retirement age
- Missourians are the least knowledgeable Americans about strategies to maximize benefits - including when to begin collecting benefits and how spouses are affected
- More than three-quarters of Missourians 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
ST. LOUIS, Oct. 31, 2012 /PRNewswire/ -- Many retirees in Missouri do not understand key issues surrounding Social Security and could be losing out on a significant amount of money that could 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. In addition, many are not necessarily aware of options and strategies that could result in higher benefits.
"With more people living longer, health care costs rising and the gradual elimination of defined benefit pensions, Social Security could play an even bigger role in ensuring the next wave of retirees feel secure during retirement," said Dino Cannella, Senior Vice President and Managing Director, BMO Private Bank, St. Louis. "Retirees paid into the program, so it's important that they take full advantage. More retirees need to do their research and get expert advice so they can make informed decisions to maximize their benefits."
Timing Impacts Dollars
The report noted that the decision about when to claim 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 while waiting until full retirement age or beyond yields a higher amount for life. However:
- While 92 percent of Missourian respondents understood that waiting longer increases the monthly amount they will receive, 53 percent admitted to collecting or planning to collect before full retirement age.
- Couples are particularly vulnerable, as a claim could affect both for their combined lifespan and significantly affect spousal and widow benefits.
The report also revealed several factors that influence when people begin taking Social Security:
- Too many decisions: Retirement timing, how much to spend and how to invest savings all affect when a person decides to collect Social Security benefits. However, it appears that too many decisions as retirement nears can lead to confusion and paralysis, pushing many people to take Social Security early by default.
- Lack of knowledge: More than half (59 percent) of Missourians do not know about general strategies to maximize Social Security benefits - the least knowledgeable group across the country - and 57 percent have not actively looked for information. Nearly two-thirds (63 percent) have not had any discussions about collecting Social Security.
- Will Social Security survive?: Is Social Security running out of money? Just under 80 percent of Missourians have concerns about its viability, even though most studies show Social Security will remain 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 Missourian retirees are not fully aware of all their options:
- Half (50 percent) of respondents in Missouri admit they are not knowledgeable about spousal benefits.
- Over half (55 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 advises retirees to make Social Security benefits part of a financial plan, one 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 50 percent of Missourians have a financial plan, yet 74 percent of retired Missourians said the advice they would give to pre-retirees is to make a financial plan.
"It's incumbent on Missouri's retirees to educate themselves on the various aspects of Social Security to maximize their benefits and make the most of their personal situation," said Cannella. "Seek expert advice, and draft a financial plan that incorporates all retirement income sources to provide a comprehensive roadmap for a comfortable retirement lifestyle."
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