Millions of Americans Consider Decision That Will Cut Social Security Benefits Due to COVID-19

COVID-19 has profoundly affected the lives of millions of Americans. And it will continue to do so long into the future. In addition to the devastating loss of life, many people will also face significant financial consequences.

One of these consequences may be a decline in lifetime social security benefits. Here’s why.

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Virus could prompt Americans to claim Social Security sooner than expected

According to a Nationwide Financial study, about 14% of all adults said they plan to claim Social Security retirement benefits earlier than expected due to COVID-19.

This may seem like the right thing to do for a number of reasons, with some people planning to claim benefits earlier than expected to allow for early retirement because they fear catching the virus at work. Others may start benefits early because they found themselves out of work and unable to find work during the 2020 recession. Still others may have seen their investment account balance take a hit when the market collapsed in March and may not have fully recovered their losses, even during the rally that followed in the following months.

But while there are many valid reasons for being tempted to apply for benefits earlier than expected due to COVID-19, it can doom you to less income in your lifetime. Indeed, claiming before the age of full retirement means that penalties for early filing apply each month you are early. And claiming any time between full retirement age and age 70 means giving up deferred retirement credits that would otherwise increase the amount of your checks.

An early claim could also increase the possibility that you will claim benefits without working for 35 years, further reducing the amount of your checks. The Social Security Administration bases benefits on the average wage over that period and includes zeros if you haven’t worked that long.

For those who choose to take their benefits earlier than scheduled, there is no recovery unless you are able to withdraw your application within 12 months of its submission. and refund everything you received. And, contrary to popular belief, if you apply for benefits early and settle for a smaller check, your benefit amount is not recalculated at retirement age. The effects of early reporting penalties never go away, and all future benefit increases are based on the smallest benefit you started with.

This means that if you later regret the fact that you started receiving your checks early during these difficult times, you will have few or no options available to resolve the issue.

Make the right choice about when to claim your social security benefits

If you are facing serious financial hardship and need to claim Social Security early to avoid having to work at a job you no longer feel safe in, claiming benefits earlier than expected may be worth it. for you, even if your actions involve your checks. will be smaller.

But before you make a decision that will reduce your lifetime benefits, be sure to consider other options. If you’ve lost your job, for example, claiming unemployment for as long as possible while looking for work may be a better solution. Even if you can’t find a traditional job that offers benefits, recent research has shown that non-traditional work can improve retirement readiness for many Americans.

Of course, not everyone will have the opportunity to find an alternative and avoid an early claim for benefits motivated by COVID-19. But before you pull the trigger and resign yourself to a little Social Security check, make sure you understand the consequences of your choice.