News headlines shouldn’t make you claim early


Elderly couple in New York. New York is the second worst state for retirement.

Allison Michael Orenstein | Getty Images

By now you’ve probably heard that the funds Social Security relies on to pay benefits are low.

According to a study from the Center for Retirement Research at Boston College, how well you perceive these circumstances is in large part shaped by one thing: media headlines.

And that can affect when you plan to claim your retirement benefits, the Center found.

Each year, the Social Security Administrative Council publishes a report on the status of funding for the program. In general, the headlines have not been optimistic.

Take this year, for example. The 2021 directors report was released in August, months later than usual as officials worked to assess the true effects of the Covid-19 pandemic.

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The pandemic only brought the exhaustion timeline forward a year, which was more optimistic than some earlier projections.

Yet officials concluded that the combined trust funds used to pay retirement, survivor and disability benefits were only 13 years old before they ran out. At that point, 78% of the promised benefits will still be payable.

This is because the income will continue to flow into the program through payroll taxes.

Much of the perception of the future of Social Security is shaped by the media coverage of this announcement.

“These findings suggest that media coverage of the trust fund has many workers fearful of an unrealistic cut in their future social security benefits,” wrote Laura D. Quinby and Gal Wettstein, researchers at the Center for Retirement Research, in the report.

The way the headlines were worded affected people differently, according to research. Age was also a big factor in how the news determined Social Security claim plans. One thing that hasn’t changed: people’s savings plans.

The research included 3,118 participants aged 21 to 61 in 2021. They were all currently in the workforce or had accumulated 40 quarters of work in order to qualify for future Social Security retirement benefits.

The group was split into four parts, each of which saw different headlines on the Directors Report 2020.

The results revealed that headlines focusing on the Trust Fund’s woes led readers to adjust their plans to claim earlier. This ranged from six months earlier, which was not considered statistically significant, to a full year earlier.

However, the headlines emphasizing the trust fund also gave readers a more realistic view of how much of their benefits would still be payable, the research found.

Don’t file early just because you have concerns about the program 12 years from now.

Scott Thomas

investment strategist at Edward Jones

Yet none of the headlines prompted readers to adjust their future savings plans.

Those most likely to change their Social Security benefit plans were workers aged 24 to 54, who will become eligible for retirement benefits after the trust fund runs out. In contrast, workers aged 55 to 61 have for the most part not adjusted their benefit expectations to reflect current events.

Coverage that focused on ongoing income that will continue to help fund the program has led to the most realistic expectations for future benefits among readers, according to the research.

However, this current income information might not be enough to prevent people from claiming early, the researchers concluded.

“If future beneficiaries follow through on their intention to claim a year earlier, they will lock in lower monthly benefits without increasing their savings to close the gap,” wrote Quinby and Wettstein.

After the release of this year’s Directors’ Report, experts said people would generally still have to wait to claim retirement benefits. However, provided that they are in good health, have sufficient income and that their decision does not have a negative impact on their spouse.

Those who are anxious may be tempted to claim retirement benefits when they first become eligible at age 62.

But by starting monthly checks soon, beneficiaries are taking a 25% to 30% hit on their monthly checks depending on their full retirement age, said Scott Thoma, investment strategist at Edward Jones.

“Don’t make your statement early just because you have concerns about the program 12 years from now,” said Thoma. “You should always make a deposit decision based on your personal financial situation and your own needs.

Larry Kotlikoff, professor of economics at Boston University and president of Economic Security Planning, who has a pessimistic view of the program, said it always pays to wait.

“Should people rush to take their Social Security benefits right away? No,” Kotlikoff said.

Because benefit cuts would be politically unpopular, changes such as tax increases would be more likely, Kotlikoff predicts. Even if there was a 25% reduction in benefits in 10 years, people would still get away with it if they waited, he said.

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