5 critical action steps every first-time homebuyer must know
arrow
David Bach’s
arrow First-Time Homebuyer Challenge
Get Access Now Learn More

Many companies featured on Money advertise with us. Opinions are our own, but compensation and
in-depth research determine where and how companies may appear. Learn more about how we make money.

Advertiser Disclosure

The purpose of this disclosure is to explain how we make money without charging you for our content.

Our mission is to help people at any stage of life make smart financial decisions through research, reporting, reviews, recommendations, and tools.

Earning your trust is essential to our success, and we believe transparency is critical to creating that trust. To that end, you should know that many or all of the companies featured here are partners who advertise with us.

Our content is free because our partners pay us a referral fee if you click on links or call any of the phone numbers on our site. If you choose to interact with the content on our site, we will likely receive compensation. If you don't, we will not be compensated. Ultimately the choice is yours.

Opinions are our own and our editors and staff writers are instructed to maintain editorial integrity, but compensation along with in-depth research will determine where, how, and in what order they appear on the page.

To find out more about our editorial process and how we make money, click here.

By Elizabeth O'Brien
July 30, 2020
Money; Getty Images

Nearly a quarter of Baby Boomers plan to postpone their retirement due to the COVID-19 pandemic, according to a new survey, and about the same number say the crisis has changed when they plan to claim their Social Security benefits.

Some 24% of those 56 and older say the pandemic has caused them to push back their planned retirement date, according to a survey conducted by The Harris Poll on behalf of The Nationwide Retirement Institute. While 401(k) balances remain buoyant for now, the U.S. is mired in a recession: the official unemployment rate is 11.1%, up from 3.7% at this time last year, and the country’s real gross domestic product plunged at an annual rate of 32.9% in the second quarter, according to numbers released Thursday morning. The bleak economic outlook probably won’t improve until a vaccine for the coronavirus is developed and distributed widely.

“There’s just a lot of uncertainty,” says Tina Ambrozy, senior vice president of strategic customer solutions at Nationwide.

Ads by Ad Practitioners
Thinking about retirement, but not sure when's the right time? Talk to a professional today!
A financial advisor can help you get your finances in order and plan for the future. Click on your state to get started.
HawaiiAlaskaFloridaSouth CarolinaGeorgiaAlabamaNorth CarolinaTennesseeRIRhode IslandCTConnecticutMAMassachusettsMaineNHNew HampshireVTVermontNew YorkNJNew JerseyDEDelawareMDMarylandWest VirginiaOhioMichiganArizonaNevadaUtahColoradoNew MexicoSouth DakotaIowaIndianaIllinoisMinnesotaWisconsinMissouriLouisianaVirginiaDCWashington DCIdahoCaliforniaNorth DakotaWashingtonOregonMontanaWyomingNebraskaKansasOklahomaPennsylvaniaKentuckyMississippiArkansasTexas
Get Started
ADVERTISEMENT

Fifteen percent of pre-retirees say they plan to take Social Security later than expected due to COVID-19, while 8% plan to claim their benefits earlier, the survey found.

However, many Americans lack a basic understanding of Social Security, which complicates their ability to make informed decisions, according to a separate survey conducted by The Harris Poll on behalf of The Nationwide Retirement Institute just before the pandemic. For example, nearly one-third of those of boomer age and beyond believe that, if they claim early, their benefit will automatically increase when they reach full retirement age, which ranges from age 66 to age 67, depending on the year of your birth.

This isn’t the case. Your benefit amount is set when you file, and the only increase you get to your monthly check is a small inflation boost every year — there’s no big jump when you reach a designated age. This means that people who file at their earliest opportunity, age 62, lock in lifetime benefits that are up to 30% lower than they would have received if they’d waited until full retirement age.

Some people may have little choice but to claim early, if they’ve been laid off and don’t have adequate savings to fall back on. But financial experts say they should at least understand the trade-offs involved.

Americans also worry that Social Security will run out of money: 66% of those boomer age and older are concerned the program will run out of funding in their lifetime. This may prompt them to claim benefits earlier than they would otherwise, in the misguided hope of getting their hands on some of the money before it goes dry.

But Social Security won’t go bankrupt. The most recent trustees report says the Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivors benefits, will be able to pay scheduled benefits on a timely basis until 2034, the same as reported last year. If Congress fails to act to bolster the program’s finances, the fund’s reserves will become depleted, and continuing tax income will cover 76% of scheduled benefits after that. That would result in a benefit reduction, not a benefit elimination.

To be sure, these projections don’t reflect the possible effects of COVID-19 on the program, the trustees note. But ongoing payroll tax revenue means that Social Security will not run out of money even if the pandemic does some damage to it. The Trump administration proposed a payroll tax cut for the next stimulus relief bill, which would have allowed workers to pocket more of each paycheck but reduced the funds going to Social Security and Medicare. While the bill remains under debate in Congress, Republicans announced last week that they would not include that proposal.

Ads by Ad Practitioners
This IRA is as good as gold!
Unlike traditional retirement accounts, Gold IRAs are backed with precious metals. Sound good? Click below now to learn more.
Start Investing in Gold
ADVERTISEMENT

More from Money:

Why Your Second Stimulus Check Could Be Higher (or Lower) Than the First One

Coronavirus Is Surging in the U.S. — Could the Pandemic Crush Your 401(k) Again?

Best Car Insurance Companies of 2020

You May Like

EDIT POST