CFPB Releases “Planning For Retirement” Tool To Help Consumers
Decide When To Claim Social Security
CFPB Report Shows Many Consumers Base Critical Claiming
Decision on Limited Information

FOR IMMEDIATE RELEASE: November 21, 2015

WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) released “Planning for Retirement,” an interactive, online tool designed to help consumers decide when to claim their Social Security retirement benefits. According to a report released by the CFPB, many older Americans are relying on Social Security for more of their income for a longer period of time, but end up receiving lower monthly benefits by claiming early. Often, the claiming-age decision is based on limited information about the financial impact of that choice. The new CFPB tool allows consumers to estimate how much money they can expect to receive at different ages and provides tips to help consumers evaluate the trade-offs.

“Millions of Americans are likely to face financial insecurity in their retirement years,” said CFPB Director Richard Cordray. “Deciding when to start claiming Social Security benefits is one of the most important financial choices a consumer will make. The CFPB’s ‘Planning for Retirement’ tool can help consumers clearly see their options.”

The “Planning for Retirement” tool can be found at: http://www.consumerfinance.gov/retirement/

Americans are eligible to claim Social Security retirement benefits without any reduction at their “full retirement age,” according to the Social Security Administration. For people born after 1942, full retirement age ranges from 66 to 67, depending on the year the person was born. Consumers can also claim their benefits several years before, agreeing to take less money each month. Or they can claim several years after, and get bigger monthly checks. Generally, the amount a consumer receives from Social Security is a one-time choice. This means if a consumer claims the reduced or increased benefit, they receive that amount for the rest of their life, with annual cost-of-living adjustments. This decision also impacts the benefits an older consumer’s surviving spouse will receive after their death.

Today, the CFPB released a report indicating that many consumers may not be taking advantage of their option to receive higher Social Security income and a more secure retirement. Specifically, the report highlights:

• Many Americans collect early despite living longer: Studies show that many retirees start collecting their benefits at their earliest eligibility age. In 2013, nearly 46 percent of claims were submitted at age 62. But, on average, Americans reaching age 65 today will live to age 85. This means consumers will likely need sufficient income and savings to cover 20 years or more in retirement.

• Millions of Americans face financial insecurity in retirement: Many consumers at and near retirement are unprepared financially. For example, four in 10 late boomers – currently ages 51-59 – are reaching retirement with limited or no savings, and are projected to face a savings shortfall.

• Retirees rely on Social Security for income: With the decline in coverage from traditional pension plans, Social Security is the only guaranteed monthly income for a majority of older consumers. Approximately two thirds of the nearly 40 million Americans aged 65 and older who receive Social Security benefits depend on it for 50 percent or more of their retirement income. Social Security is particularly important for the growing number of beneficiaries aged 80 and older for whom it accounts for 70 percent or more of their income.

• Consumers lack awareness and information about the claiming-age choice: Studies have shown that people claiming Social Security before their full retirement age have less knowledge about their benefits than those who claim at or after their full retirement age. Several recent surveys show that a significant portion of pre-retirees are confused about or lack basic knowledge of information about Social Security benefits. For example, one study found that only 22 percent of pre-retirees surveyed knew their full retirement age. Only 12 percent knew how their benefits would change if they claimed before, at, or after their full retirement age. And only about 5 percent of those surveyed said that they knew how their benefits are calculated.

Today’s CFPB report about Social Security can be found at: http://files.consumerfinance.gov/f/201511_cfpb_issue-brief-social-security-claiming-age-and-retirement-security.pdf

Planning for Retirement
Retirement is an increasingly complex process with multiple decision points. Choosing when to claim Social Security requires consideration of longevity, inflation, current savings, interest rates, as well as planning and budgeting. The CFPB has worked closely with the Social Security Administration to offer the “Planning for Retirement” tool, an unbiased, trusted source of information. Consumers can use the tool, which is also available in Spanish, with the confidence that they are getting impartial information. Benefits of the interactive tool include:

• Claiming-age benefit estimates easy to access: With the CFPB tool, consumers can plug in their date of birth and highest annual work income to see their estimated monthly benefits based on their claiming age. They can see the difference in benefits associated with claiming at age 62 versus age 70. Estimates are based on current formulas from the Social Security Administration, not a user’s actual earnings record.

• Trade-offs easy to understand: The tool enables consumers to consider alternative scenarios. By selecting different claiming ages consumers can see how the one-time decision may affect them in the long run. The tool shows the estimated cumulative value of benefits by age 85. Consumers can see that by not claiming early, they will get more money in the end.

• Impact of different life factors easy to identify: The tool provides tips to help users consider the relationship between claiming age and other related factors, such as marital status, other expected sources of income, plans for working after age 60, and general expectations of longevity. For example, on average, Social Security replaces 40 percent of a worker’s income. That means a consumer’s retirement savings, pension, 401(k), Individual Retirement Account (IRA), or myRA will need to fill the gap. Claiming at the full Social Security benefit age or later can minimize this gap and maximize a consumer’s monthly benefit. If a consumer claims before their full retirement age, their monthly benefit could be reduced by as much as 30 percent.

The CFPB’s Office for Older Americans was specifically tasked under the Dodd-Frank Wall Street Reform and Consumer Protection Act to help consumers make sound financial decisions as they age. More information about the CFPB’s work on behalf of older Americans can be found at: http://www.consumerfinance.gov/older-americans

The Spanish version of the “Planning for Retirement” tool can be found at: http://www.consumerfinance.gov/jubilacion

The Social Security Administration’s website shows a consumer’s actual earnings record. To view or open an account, go to: http://www.socialsecurity.gov/myaccount

The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

CONTACT: Office of Communications Tel: (202) 435-7170