House Committee Advances Bill Meant to Assist Retirees in Maximizing Social Security

The House Committee on Ways and Means this week advanced a bill meant to change Social Security’s terminology to provide retirees with more clarity as they determine when to begin to claim benefits.

The legislation passed by a vote of 41 to 1. The bill would make several changes to the terms that describe benefit claiming ages to help retirees better understand how the timing of when they choose to claim benefits will affect the monthly payments they receive.

The changes would adjust the current terminology of: “early eligibility age,” “full retirement age” and “delayed retirement credits” to “minimum monthly benefit age,” “standard monthly benefit age” and “maximum monthly benefit age,” respectively.

Representative Lloyd Smucker, R-Pennsylvania, introduced the bill one week prior to the committee vote. Meanwhile, Senator Bill Cassidy, R-Louisiana, who chairs the Senate Committee on Health, Education, Labor and Pensions, introduced the Senate version of the bill in April, but it has yet to receive a vote.

Retirees can claim Social Security benefits as early as age 62, but higher benefits are paid out to those who decide to wait. Maximum benefits kick in for those who wait until age 70 to claim benefits.

There are trade-offs for claiming benefits early, as well as for waiting until age 70. Claiming early offers retirees payouts that can delay the need to tap into 401(k) or other savings vehicles, but it means reduced benefits throughout retirement.

For those who wait until age 70 to claim, they will receive, on average, about $806 more per month compared to claiming at 62. Though they would receive higher benefits, they forfeit the financial flexibility the benefits could offer early in retirement and face sequence-of-return risk in their invested assets.

When a retiree takes money out of their investment during a market downturn, they may have to sell their investment for less than they paid. This can greatly lower the overall value of their portfolio. As a result, there will be less money left to benefit from any future market recoveries.

In 2023, about 23% of retirees claimed Social Security at age 62, while 59% of people aged 63 to 66 claimed benefits, and only 9% claimed at age 70 or later, according to data from the Social Security Administration.