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As Social Security Age Rises, Annuities Can Help You Retire on Time


While this association certainly makes sense, data has backed up the fact that the rising age for claiming full Social Security benefits has led to an increase in the length of people’s working lives.  Paula Aven Gladych of Benefits Pro wrote “Rising Social Security age will see retirees working longer,” an article published on Producers Web.  The Congressional Budget Office found that people are waiting longer to claim their Social Security benefits so that they can receive a higher amount of money at their full retirement age (FRA).  People born before 1943 have had a full retirement age of 65, so they can receive all of their benefits at age 65.  Now this age is increased to 67 for people born after 1960.

This increase is forcing some people to work longer because they can’t pay their bills without their Social Security income.  Keep in mind though, that Social Security income should really not be your full source of retirement income because it is unlikely to afford you a very comfortable retirement.  Annuities can bridge the gap between age 65 and age 67 for people who don’t want or truly need to work an extra two years or so.  If you have saved well over your working life and have the ability, buying an annuity with your savings can finance your early retirement before you start getting Social Security payments.  Then, at 67, you can have extra income coming in or make an annuity exchange to lessen your payments and make your money last longer.

Changes in the labor force participation rate because of the increasing FRA were significant.  Men in the age group of 62-64 have a labor force participation rate of 52%, which is forecast to increase to 55% in the next decade.  The rate is expected to increase from 37% to 41% for men in the age group of 65-69.  Women in both age groups are expected to see a 4% increase in their labor force participation rate as well.  Now the CBO does say there are other reasons for the increasing age that people are working to, including an increase in the delayed retirement credit that people receive for waiting to take their Social Security payments.  There has also been a change to the earnings test that determines at which income level Social Security benefits will be reduced.  If you are affected by these changes, an annuity purchase may help you retire when you had originally planned, even without Social Security payments coming in yet.

Written by Rachel Summit

Follow Rachel, aka Finance Mama, on Twitter https://twitter.com/#!/financemama

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