A Fidelity news release said the top reasons driving their decision to collect early are immediate financial needs and health and longevity concerns.
Of those who plan to begin drawing down at age 62, more than three quarters (77%) will use the funds to pay for basic living expenses, such as food, utility costs, and mortgages. This group expects their Social Security payments to comprise as much as half (49%) of their total retirement income, yet when asked to quantify their Social Security payments, only 22% knew exactly how much their check will be, according to Fidelity.
Nearly three quarters (73%) of those planning to start taking Social Security at age 62 are also making their decision without having a formal retirement income plan.
“Many Americans who are within one year of beginning to collect their Social Security retirement benefits may be planning to rely too much on it, considering Social Security currently only funds a little more than one-third, or 37% of an average retiree’s income,” said Carolyn Clancy, executive vice president, Fidelity Investments Personal and Workplace Investing, in the news release. “Social Security-related decisions can be complex and there can be tradeoffs associated with the various payment strategies. But with some basic guidance and a lifetime retirement income plan, individuals may find it easier than they think to make an informed decision and get the most from their benefits.”
When quizzed about issues such as filing requirements and taxation, a vast majority (85%) correctly identify age 62 as the earliest possible age that people may become eligible for Social Security, but 56% do not know when they will be eligible for full Social Security benefits (age 66 for those born 1943-54).
More than half (54%) are unaware that they need to file for their benefit three months before they wish to start receiving payments. Seven percent of respondents incorrectly believe that the Social Security Administration (SSA) will contact them when it is time to receive benefits. Nearly one third (31%) also believe that Social Security payments are not taxable, and 12% were not aware that working in retirement could impact their benefits.
Half (51%) also are not aware that when a spouse passes away, the surviving spouse may be eligible to receive the larger of their two Social Security payments.