WASHINGTON – U.S. Senators Bill Cassidy, M.D. (R-LA), Tim Kaine (D-VA), Susan Collins (R-ME), and Chris Coons (D-DE), introduced legislation to help Americans better plan for retirement and enhance retirement security by ensuring they have the information they need to make more informed decisions regarding when to claim Social Security Benefits. This is particularly important today, as Americans are living longer than ever, and rising health care costs often lead to unexpected expenses that can drain savings.
One of the key financial decisions facing older Americans is when to claim Social Security retirement benefits. Social Security benefits are available to Americans who are as young as age 62, but those who choose to claim their benefits later receive higher monthly payments, with the maximum benefits available to those who claim at age 70 or older.
Most people do not claim benefits at the age that would maximize their income in retirement. By doing so, they forgo a significant amount of retirement income. To provide additional clarity for Americans deciding when to claim their benefits, this legislation changes the Social Security Administration’s (SSA) terminology from “early eligibility age,” “full retirement age,” and “delayed retirement credits” to “minimum benefit age,” “standard benefit age,” and “maximum benefit age” to better reflect Social Security’s claiming design and how the program works.
The legislation would also help Americans better plan for retirement by requiring the SSA to mail social security statements—which detail how much a person has paid into Social Security and Medicare—every five years to individuals with Social Security accounts between the ages of 25 and 54, every two years for those between the ages of 55 and 59, and annually for those 60 and above.
“Americans have earned their Social Security and should have the best financial information available when they retire,” said Dr. Cassidy. “Our bill ensures Americans planning for retirement get the most out of their benefit.”
“The retirement timeline that’s right for one Virginian could look very different from the perfect plan for another,” said Senator Kaine. “That’s why it couldn’t be more important that the information families need to make the decisions that are best for them is accessible and clear. This bipartisan bill would help us make strides in increasing access to that critical information, and I will continue to push the Social Security Administration to find other ways to make it easier for Americans to make informed decisions about their financial futures.”
“Ensuring that more people are better prepared financially for retirement has consistently been one of my priorities,” said Senator Collins. “Our bipartisan legislation would help improve retirement security by providing more details and transparent information to enable hardworking Americans to better plan for retirement and make decisions about when to claim the Social Security benefits they have earned.”
“As American workers prepare for retirement, it’s crucial that they have as much information as possible to ensure they can maximize the social security benefits that they’ve earned. Through simple language changes, we can make it easier for countless Americans to claim social security at the best time and get the most out of their retirement income. Bipartisan legislation that improves social security is possible, and I encourage the Senate to take up and swiftly pass this commonsense bill,” said Senator Coons.
Click here for bill text on nomenclature.
Click here for bill text on regular statements for beneficiaries.
Cassidy, Kaine, Collins, and Coons also sent a letter to SSA urging them to develop an action plan to help individuals make more informed claiming decisions.
“[W]e believe SSA should take more proactive measures to provide Americans with the tools and resources to determine how best to set themselves and their families up for financial security in retirement,” wrote the senators.
Read the full letter here or below:
Dear Acting Commissioner Kijakazi:
The decision of when to claim Social Security benefits is crucial to the financial security of older Americans. We write to request that the Social Security Administration (SSA) develop an action plan to help individuals make more informed claiming decisions, with the goal of enhancing retirement security.
As you know, Social Security is the foundation of retirement security in the United States, and it has made the difference between poverty and a comfortable retirement for millions of Americans. Among households headed by someone aged 65 or over, four in ten rely on Social Security benefits for a majority of their total income, while 14 percent depend on Social Security for at least 90 percent of income. Social Security provides not only income but also crucial protection against the risk of outliving one’s assets. This is particularly important today, as Americans are living longer than ever before and rising health care costs often lead to unexpected expenses that can drain savings.
When to claim Social Security benefits is a critical decision for older Americans planning their retirement. Most people, however, do not claim benefits at the age that would maximize their income in retirement, usually because they claim too early. A large body of evidence has confirmed that delaying claiming past the Early Eligibility Age (EEA) of 62 is financially advantageous for most Americans, as it provides them with a greater monthly benefit for the remainder of their lives. Nonetheless, 62 remains the most frequent claiming age, with nearly 35 percent of men and 40 percent of women claiming at the EEA in 2018. In 2020, the Bipartisan Policy Center released a report detailing issues surrounding suboptimal claiming and presenting policy options that could help America’s seniors make more advantageous claiming decisions.
By claiming early, Americans forgo a significant amount of retirement income. A 2019 study estimated that today’s older Americans will lose a total of $3.4 trillion in potential income because of early claiming, with an average lifetime loss of $111,000 per household. Strikingly, only 4 percent wait to claim until age 70, even though this research finds that about 57 percent of older Americans would maximize their lifetime wealth if they waited to claim until then. The study estimates that the poverty rate for Americans over age 70 would be nearly cut in half—from 13 percent to 7 percent—if all older Americans claimed Social Security at the ages that would maximize their lifetime income.
When to claim Social Security benefits is ultimately a personal decision that must reflect seniors’ individual financial circumstances and needs. Indeed, early claiming is wise for a minority of Americans based on liquidity constraints, financial shocks, inability to continue working, life expectancy, or preferences for passing on assets to heirs. However, given that many older Americans make claiming decisions that put them at a financial disadvantage for the rest of their lives, we believe that SSA should take more proactive measures to provide Americans with the tools and resources to determine how best to set themselves and their families up for financial security in retirement.
Accordingly, we request a response to the following questions about SSA’s practices to inform Americans’ claiming decisions no later than June 2, 2023:
- What are the primary factors leading Americans to claim Social Security retirement benefits earlier than the full retirement age? What actions has SSA taken thus far to address these factors or educate the public about the tradeoffs of early versus delayed claiming?
- What further steps does SSA plan to take to help Americans make more informed decisions about when to claim Social Security retirement benefits? We have included in the appendix potential reform options that may be of value to you as you respond to this question.
- Research has found that the current nomenclature that SSA uses to refer to claiming ages and benefits for delayed claiming—“early eligibility age,” “full retirement age,” and “delayed retirement credits”—is confusing to many Americans and that changing the terminology to “minimum benefit age,” “standard benefit age,” and “maximum benefit age” would delay average claiming and increase understanding of Social Security’s claiming design. Does SSA intend to change the claiming nomenclature to improve Americans’ understanding of how the program operates?
- We believe that the redesigned Social Security Statement is a positive step towards providing Americans comprehensive information in a digestible format and commend the agency for that work. We also believe that the refreshed statement should be distributed on a more regular basis. Has SSA seen any difference in claiming behavior because of the rollout of the new Statement?
We look forward to continuing to work with you to help Americans make informed decisions about claiming Social Security benefits, thereby promoting enhanced retirement security.