Recent GAO Report Highlights Mistakes Americans Make with Social Security
The U.S. Government Accountability Office recently released a report entitled “Social Security: Improvements to Claims Processes Could Help People Make Better Informed Decisions About Retirement Benefits.”
The report was conducted according to GAO because many individuals continue to claim their Social Security retirement benefits at the earliest eligibility age, even though their payments would be higher if they were to wait. The GAO emphasized the importance of having people understand the right time to claim.
The GAO report highlighted the importance of Social Security benefits, including the tax benefits as well as the provision of survival and spousal benefits. It went on to say these have become even more important as employer retirement plans have moved in the direction of defined contribution plans.
The following highlights some of the important things noted in this September 2016 report.
People Worry Too Much Over Breaking Even
With Social Security payments, many people fear they will die before they’re able to take advantage of all of their benefits. They worry so much about this concept of leaving something on the table that they start receiving their benefits too early, and don’t put enough focus on the very real idea that they could outlive their retirement benefits. If you live for many years during retirement, which many more people do, it’s much smarter to delay benefits in most cases. Waiting until 70 to receive benefits can be smart because that’s the age when they “max out.”
photo Gerd Altmann via Pixabay
Retirees May Not Factor In Individual Circumstances
The GAO report highlights something very interesting, and that’s the fact that many people don’t take into account their individual circumstances when they’re making critical Social Security decisions. Some of the factors cited in the report as being key to the decision include claiming age, life expectancy, earnings, and longevity risk as the GAO puts it. The report also shows that oftentimes employees who work with claimants on Social Security aren’t well-equipped to explain these factors to them. The report showed information actually tended to be better laid out and explained in online and printed materials. There are also a number of online calculators that can serve as useful tools for Social Security recipients.
Not Understanding That Benefits Could Be Taxable
Much of the GAO report was unique because it shed light on misunderstandings real people have when it comes to their Social Security benefits. One thing the government agency found is that retirees may not understand there could be taxes applicable to them, depending on their situation. For example, if a retiree makes required yearly withdrawals from a traditional IRA, it could mean that a portion of their Social Security benefits then become taxable. One possible solution to this issue would be to start withdrawing from the retirement account while you’re in your 60s before you make a claim on your Social Security benefits.
It’s important for all Americans, regardless of age but particularly for retirees, to have an understanding of their Social Security benefits. This newly released report really shows some of the key places American retirees are making costly mistakes regarding their Social Security, as well as actionable ways these errors might be remedied.
Author: Carmelo Hannity
