If you could prevent a 43% loss per year, every year, for the next 20 to 30 years, would you? Records show the majority of retired people will not and have not. Here’s why.
The majority of retirees take their Social Security benefits as soon as they are eligible – age 62. And, the best efforts of the financial advice business to convince pre-retirees that this is a huge error, has made no impact at all.
All efforts to change this incredibly costly behavior have fallen on deaf ears. So much so that the industry is resorting to mind games to try to trick folks into making better money decisions.
I know it sounds ridiculous, but this could work.
Here’s one technique that will be useful to any person who is about to retire.
Instead of thinking about how much more you will receive by delaying your benefits, which obviously hasn’t worked, try looking at it backward.
Start at age 70 and look back to age 62, then add up how much you will lose by opting for the earliest eligible date to receive your benefits.
But before I run through this example, recognize that every situation is different and these numbers may not be exactly like yours, but they will be close.
Let’s use an annual income of $100,000 for your last year at work, a current age of 60 and a retirement age of 70.
Now your benefits for this situation, retiring at 70, would be $37,232 a year, or $3,103 a month.
Now using the same age and income numbers, if you apply for benefits at age 62, which is what the majority of people do, you will lose 43% of that income every year.
Your monthly income drops to $1,763 a month from $3,103:
($3,103 – $1,763) / $3,103 = 43%
Over eight years, from age 62 to 70, that’s a total loss of $128,616 or $16,077 per year.
If you could, would you prevent a $128,616 loss during the first eight years of your retirement? How about a $402,000 loss over 25 years?
It is absolutely devastating in these terms, isn’t it?
Check out your own Social Security situation using the link below this screen, and try backward thinking for your retirement decisions.
http://www.bankrate.com/calculators/retirement/social-security-benefits-calculator.aspx