Warning over 'big myth' that causes Americans to miss out out on crucial retirement income

Americans are taking their Social Security benefits too early and it is costing them in the long run, an economist has warned.

Too many retirees are buying into the 'myth' that Social Security funds will run out and they must take advantage of them now, according to Emerson Sprick, associate director of the economic policy program at the Bipartisan Policy Center.

Senior citizens are advised to wait until their 'full retirement age' - typically around 66 or 67 - to receive the benefit. They can technically claim it from age 62, though this incurs a 30 percent penalty.

Sprick's comments come after a new report warned that Social Security funds are expected to run short by 2035 unless Congress acts soon. 

'The biggest myth about Social Security is that when the trust fund runs out, the program is just going away,' Sprick told CNBC. 

Emerson Sprick (pictured) said too many retirees are buying into the 'myth' that Social Security funds will run out and they must take advantage of them now

Senior citizens are advised to wait until their 'full retirement age' - typically around 66 or 67 - to receive the benefit. They can technically claim it from age 62, though this incurs a 30 percent penalty

The official Society Security funds may be depleted but the program will still have revenue from payroll taxes and the benefits will still be paid, even if reduced.

A 2023 Nationwide Retirement Institute survey found that 75 percent of adults aged 50 and above believe Social Security will run out in their lifetime.

It is little wonder then that many feel rushed into taking the benefit. A Bipartisan Policy Center report found the most popular age to claim is 62.

But this triggers a lifetime reduction in payments which depends on your full retirement age which varies depending on your birth year.

For example, those born in 1937 and earlier have a retirement age of 65 while those born between 1943 and 1954 have a full retirement age of 66.

Those born in 1960 or later have a retirement age of 67.

Social Security recipients benefited from a 3.2 percent increase to their payments between 2023 and 2024 

The benefits, handed out to 71 million Americans, rise each year in-line with inflation which has remained stubbornly sticky 

If somebody whose full retirement age is 67 retired at 62 the benefits are slashed at the highest rate of 30 percent. But if they wait until 64, the reduction is 20 percent. 

And the Government will pay those who delay their retirement - thanks to a credit created by Congress in 1972.

It means a senior worker sees their benefits increase by 8 percent each year they work beyond their full retirement age up until their 70th birthday.

Somebody with a retirement age of 67 can receive 124 percent of their benefit if they don’t sign up until they turn 70.

And retirees should also be aware eligibility for Medicare only kicks in once they turn 65. 

It comes after policy analysts predicted Social Security benefits will increase by $60 a month next year, in-line with inflation.