By simply plugging in their information, people can more easily see the trade-offs they could make in weighing key decisions like when to start claiming their benefits against other decisions they might make about working longer or cashing out other available assets. Thus the tool enables people to consider alternative scenarios. They can assess the long-range effects of this one-time decision because the tool shows how their estimated benefits will accumulate over time depending on when they first began to claim those benefits.
They can also see the effects of other life factors. The tool provides tips on claiming options depending on marital status, other expected sources of income, plans for working longer, and general expectations of longevity. For example, because surviving spouses receive the higher of the two spouses’ benefits, it may make sense for the higher-earning spouse to claim at their full retirement age or after in order to get the highest possible benefit and minimize the reduction in income that a surviving spouse is likely to experience.
When we designed this tool, we looked at changing trends and how different consumers access information. We developed a tool that is optimized for mobile use. We also created a Spanish version of the tool, because Spanish speakers are expected to be one of the fastest-growing segments of the population that will be making the claiming decision by 2050. For this group, our tool will offer an additional resource to their limited sources of information on this issue.
It also matters enormously that this new tool comes from the Consumer Financial Protection Bureau, which is increasingly known as a source that offers people neutral and unbiased information. Our only goal with this tool is to inform, educate, and empower Americans to make the best decisions they can for themselves and their loved ones.
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We want consumers who use our tool to know and understand what it means to claim at their full retirement age versus several years before or several years after. Most people will see that even allowing their benefits to grow for one more year can make a big difference, as they usually will get 5 to 8 percent more in benefits each year they wait to claim after age 62. A higher monthly benefit may matter more when they are older, other sources of income and savings may be depleted, and Social Security plays a more central role in their retirement income.
In general, consumers should engage in basic budget planning; they should be aware of how much money comes in and goes out each month. As they near retirement, they should consider both their actual income and expenses before retirement and their expected income and expenses after retirement. This can help them see how a lesser or greater level of benefits will affect their ability to meet their needs when they are no longer working. In addition, this kind of budgeting can help them decide if they need to reduce their expenses and pay off any debts before retiring.
Consumers may find that it pays to keep working, if they can. Staying in the workforce – full or part time – even for one or two more years can increase Social Security benefits by replacing prior years with low or no earnings. It also allows more time to save for retirement.
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Alongside the Social Security Administration, we want to make life better for older consumers. Both agencies were born out of financial crises, and together we are both driven to help people put themselves in position to make the most of their financial circumstances.
As the American economy continues to recover, we want consumers of all ages to be able to look ahead with hope and resilience. We want to remind them that they still have the formidable Social Security Administration working to support their economic security, but now they also have the new Consumer Bureau standing on their side and looking out for their interests, as we work to help restore confidence and trust in the consumer financial marketplace. As we can see here today, this partnership makes for a great combination. Thank you.
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