Almost a third of non-retired Americans (30%) ages 45 and older plan to collect Social Security benefits before reaching full retirement age, while only 10% plan to wait until age 70 when they are eligible to collect maximum monthly payments, according to a new survey.
Schroders U.S. Retirement survey found the choice to collect at a younger age appeared to be a deliberate one, as 74% of respondents not already retired said they understood that monthly payments increased with retirement age, as did 84% of those 60-67 years old.
“Social Security is the primary source of income for the majority of Americans we surveyed, which is why we were surprised to see so many deciding not to wait until 70 for larger monthly payments; or worse, sacrificing their full benefits by tapping into them early,” said Joel Schiffman, Schroders head of intermediary distribution, North America, in a press release.
“It might come down to being able to afford to wait,” he added. ”And that’s a function of how much they have saved in order to generate sufficient income in retirement. Waiting a few extra years before claiming your benefits can provide a much-needed cushion for future expenses.”
For 58% of retirees and 52% of those not yet retired, Social Security is or will be their main source of income. However, 64% of those not retired and 62% of retirees believe it won’t be enough to live on.
Respondents, who were between ages 45 and 75, say they do have additional sources of income, such as cash savings (58%), investment income (48%), pension plans (40%), annuities (19%) and rental income (12%).
Most Don’t Have Good Income Strategies
But the survey also found that 74% are concerned they don’t know how to best generate income and/or draw down their assets in retirement, a finding that would indicate many might benefit from the help of a financial advisor.
Among retirees who participated in the survey, 50% said they had no strategies to generate income, they “just take money when I need it.” Some did mention income-producing strategies including:
• systematic withdrawals from a defined contribution plan or IRA (28%),
• dividend-producing stocks or mutual funds (19%),
• annuities (13%),
• CDs (11%),
• individual bonds or bond mutual funds (9%), and
• managed payout funds (9%).
“Generating income in retirement is more challenging than ever thanks to the prevailing low interest rate environment,” said Schiffman. “Social Security is one piece of the puzzle, but it’s not a panacea. With many of us spending 30 or more years in retirement, generating sustainable income beyond what’s provided by Social Security is vital to creating a comfortable lifestyle.”
Schroders U.S. Retirement survey included 1,000 consumers nationwide between the ages of 45 and 75 and was conducted between January 20 – 27, 2021.
Jonas Gryder is a freelance writer.