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A new Congressional proposal, the 401Kids Savings Act, would create savings accounts for children starting from birth.
As states implement similar programs, Congressional lawmakers are divided as to whether a national program makes sense.

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An unequal distribution of wealth in the U.S. can make it so some children are behind from birth.
Now lawmakers are considering whether federal children’s savings accounts can help.

One proposal — the 401Kids Savings Act — would create savings accounts for all newborns. Low- and moderate- income families would receive federal contributions if their modified adjusted gross incomes falls under certain thresholds. Children in households that qualify for the earned income tax credit would receive additional aid. All families would be eligible to contribute up to $2,500 per year.
By the time some children turn 18 — particularly a qualifying low-income newborn born to a single parent — up to $53,000 may be accumulated for their benefit, according to the proposal.
Children’s savings accounts are currently available statewide in seven states — California, Illinois, Maine, Nebraska, Nevada, Pennsylvania and Rhode Island.
At the end of last year, there were 121 children’s savings account programs in 39 states serving 5.8 million children.
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The programs are aimed at helping to reduce unequal wealth distribution among American child households, which research shows is prevalent among Black and Hispanic households as compared to white households.
“All the evidence from existing programs shows that money not only unlocks opportunities for kids, it’s a smart investment that goes right back into the economy down the road,” Sen. Ron Wyden, D-Oregon, and chairman of the Senate Finance Committee, said at a Tuesday hearing.
However, implementing a federal program may come with significant costs to taxpayers, said Sen. Mike Crapo, R-Idaho, who is the ranking member on the committee.
“Expanding options to save is a worthy goal, but we must do so in a way that does not exacerbate already out-of-control government spending, or create another unsustainable government program,” Crapo said.

State child savings accounts show promise

Even without federal funding, children’s savings accounts have shown the ability to help families build wealth, William Elliott, a professor of social work at the University of Michigan, testified on Tuesday.
Existing programs provide small initial deposits ranging from $5 to $1,000, he said.
In the SEED for Oklahoma Kids experiment, which deposited $1,000 on behalf randomly selected newborn participants including low-income and Black families, the average child now has about $4,373 in their account at age 14.
“Even when family savings are minimal, significant assets accumulate in these types of accounts,” Elliott said.
The money doesn’t just help improve financial preparedness for college, he said. It has also been shown to help children’s early social emotional development, math and reading scores and increase the likelihood they will eventually enroll in college.

In Maine, the Alfond Scholarship Foundation has provided all babies born in the state with a $500 grant towards either college or future training.
To date, the foundation has invested about $78 million on behalf of 156,000 children, according to Colleen Quint, president and CEO of the Alfond Scholarship Foundation.
Families have contributed about three times that amount, or about $236 million, she said. They have also received about $29 million in matching grants from the state.
The total invested — about $344 million — grew to $477 million in the market as of the end of April, according to Quint.
Early data shows the $500 investment families receive has an outsized impact on their aspirations, savings behaviors and engagement around education, she said.
A federal program would help give residents of all states the same opportunity.
“We don’t have to imagine what a national platform would look like,” Quint said. “We can see it happening now.”

Concerns about inflation, tax implications

Critics of the children’s savings plans point out the government already deployed massive amounts of stimulus money during the pandemic, which hasn’t meaningfully boosted long-term savings.
“Savings rates are again near historic lows,” Adam Michel, director of tax policy studies at the Cato Institute, said at the hearing.
“In this case, checks from the government fueled more inflation than they did wealth building,” he said.

Other approaches may better help to address wealth inequities for young children.
Reforming the tax code can help prevent double taxation on wages when they are earned, as well as interest that accumulates on saving, Michel said. While that disincentive has been reduced for 401(k)s and 529 plans, they still come with restrictions on how the money may be used that may discourage low- and middle-income individuals from using them.
The 401Kids proposal calls for children to only have access to the funds once they turn 18. The money would have to be used for education, training, a home purchase or to start a business. The funds could also be rolled over to a Roth individual retirement account or ABLE account for children with disabilities.
Universal savings accounts, which may allow for more flexibility in uses for the money, may be a better solution, some experts said.
“Universal savings account have a benefit that they do not discourage savings for those who are concerned that the conditions for withdrawal … would stop them from addressing an emergency in their family,” said Veronique de Rugy, senior research fellow at The Mercatus Center. More

Nearly one-third of aspiring homebuyers plan to pull money from their 401(k) plan to help cover the cost, according to the Real Financial Progress Index by BMO Financial Group.
Millennials and Gen Zers are more likely than older workers to say they will pull from retirement accounts to buy a home.
While a 401(k) loan might be a better option, doing so entails its own set of risks, experts say.

Some young retirement savers say they might raid their 401(k) accounts to buy a home. Doing so, however, could be to their detriment, experts warn.
Nearly one-third (30%) of aspiring homeowners say they plan to withdraw funds from their 401(k) plan to fund a purchase, according to the Real Financial Progress Index by BMO Financial Group. BMO polled 2,505 U.S. adults this spring.

Millennials and Generation Z are more likely than older generations to say they will pull out money from their 401(k), BMO found, at 31% and 34%, respectively. To compare, only 25% of Generation X homebuyers and 16% of baby boomers plan to withdraw retirement funds for a home purchase.
“You really, really, really, really shouldn’t be taking out your retirement for a house,” said Stacy Francis, a certified financial planner and president and CEO of Francis Financial in New York City.
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Generally, early withdrawals from retirement accounts can trigger taxes and a 10% penalty, unless the account owner meets a listed exception. For both individual retirement accounts and 401(k)s, qualifying first-time homebuyers may be able to take up to $10,000 penalty-free. With Roth IRAs, owners can withdraw their post-tax contributions at any time without penalty.
Still, “it’s much better to have those dollars working for you,” said Francis, a member of the CNBC Financial Advisor Council.

While a 401(k) loan might be a better option to meet necessary payments for a home purchase, doing so entails its own set of financial risks, experts say.

‘Significant financial consequences’ for withdrawals

More savers tapped into their retirement savings last year, which experts say shows that some households were facing financial distress. In 2023, 3.6% of savers took out hardship withdrawals, up from 2.8% in 2022, according to Vanguard’s How America Saves 2024 preview.
But making withdrawals from your 401(k) plan can have “significant financial consequences,” said Tom Parrish, head of lending at BMO. Not only will you be denting your funds set aside for retirement, early withdrawals can also often subject you to associated penalty fees and taxes, he said.

“There’s a reason there’s limitations to these accounts. They’re in your favor,” said Clifford Cornell, a certified financial planner and an associate financial advisor at Bone Fide Wealth in New York.
For example, a 30-year-old worker who left $10,000 in their 401(k) instead of withdrawing it could end up with nearly $77,000 more for retirement at age 65, assuming average annual returns of 6%.

The pros and cons of 401(k) loans

While experts say taking out a loan against your 401(k) is generally a bad idea, it can be a more palatable option for the down payment or part of closing costs of a home, versus a withdrawal.
Federal law allows workers to borrow up to 50% of their 401(k) account balance or $50,000, whichever is less, without penalty as long as the loan is repaid within five years.
“The key thing is to ensure that you pay that back over that period of time,” Parrish said.
However, if you leave your company — whether you’re laid off or find a new job — most employers will require your outstanding balance be repaid more quickly.

Another risk is that you overstretch on your home budget. Purchasing a home entails long-term, real commitments, said Francis. Not only are buyers responsible for down payment, moving and closing costs, they then also have ongoing payments for the mortgage, real estate taxes and maintenance costs to consider.
“It’s going to be a very expensive thing for you to do,” she said. If “any little domino falls the wrong way,” you might not be able to pay neither the 401(k) loan nor the mortgage, putting yourself in a “real deep financial hole,” Francis said.

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Many homeowners are sitting on low-interest-rate mortgages and could face the decision of whether to sell or rent out their property when it’s time to move.
Roughly 6 in 10 existing fixed-rate U.S. mortgage holders had an interest rate below 4% during the fourth quarter of 2023.
The average 30-year fixed-rate mortgage was around 7% in May.
You should weigh affordability, hassle and possible tax breaks before renting out your property.

A “For Rent” sign is posted near a home in Houston, Texas, on Feb. 7, 2022.
Brandon Bell | Getty Images

Many Americans are sitting on low-interest-rate mortgages and could face a decision when it is time to move: sell or rent out their existing property. That choice could be tricky, especially for those eager to buy another home.
Roughly 6 in 10 existing fixed-rate U.S. mortgage holders had an interest rate below 4% during the fourth quarter of 2023, according to the latest figures from the Federal Housing Finance Agency. By comparison, the average 30-year fixed-rate mortgage was around 7% in May.

However, renting out your old home while buying another “gets very, very complicated, which is why most people don’t do it,” said Keith Gumbinger, vice president of mortgage website HSH.
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Homeownership has become increasingly unaffordable amid higher interest rates and soaring home values. That makes qualifying for a second mortgage harder, especially without tapping equity from your original property, Gumbinger said.
The typical down payment for first-time homebuyers was 8% in 2023, compared to 19% for repeat buyers, based on transactions from July 2022 to June 2023, according to a survey from the National Association of Realtors.
Plus, if you are using rental income to qualify for the second mortgage, lenders typically only consider 75% of your proceeds, Gumbinger said.

Renting out your home isn’t ‘easy money’

You also need to consider whether you have the time or desire to manage a rental property, said certified financial planner Kashif Ahmed, president of American Private Wealth in Bedford, Massachusetts.
“Be careful about wanting to be a landlord,” he said. “It’s not the panacea you think it is.”

Be careful about wanting to be a landlord. It’s not the panacea you think it is.

Kashif Ahmed
President of American Private Wealth

Ahmed, who owns rental property in Austin, Texas, warned that some first-time landlords do not consider the costs of ongoing maintenance, lower rents or vacancies, among other expenses.
Plus, you will typically pay about 25% more for insurance as a landlord compared to your standard homeowners policy, according to the Insurance Information Institute.
“It’s not easy money” after factoring in the stress and added costs, Ahmed said.

The capital gains tax break is a ‘huge factor’

If your original home has significant equity, you will also need to consider the capital gains exemption for primary residences.
Married couples filing together can earn up to $500,000 on the sale without owing capital gains taxes and single filers can make $250,000.
But there are strict IRS rules to qualify.
Renting your home starts the clock for the “residence test,” which says the home must be your primary residence for 24 months of the five years before the sale. The 24 months do not need to be consecutive.
“It’s a huge factor,” said CFP David Flores Wilson, managing partner at Sincerus Advisory in New York. “Those numbers go into projections.”
Of course, the choice to sell your first home or rent it out ultimately hinges on your financial plan, and cash flow changes can affect retirement and other goals, he said.

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Americans have been grappling with higher food costs since 2021.
To get relief, some are turning to credit cards, buy now, pay later programs or payday loans.
But those balances can be difficult to pay down due to a higher cost of living.

Young woman feeling concerned about grocery prices on the bill in the supermarket.
Lordhenrivoton | E+ | Getty Images

Many shoppers have been shocked by what they pay at the grocery store checkout.
Food prices shot up amid broader inflation in recent years, and remain high for many staples.

As consumers struggle with elevated food costs that can lead to unpaid debt balances.
Many families dipped into their savings or turned to credit cards, buy now, pay later installment programs or payday loans to pay for groceries in 2023, according to new research from the Urban Institute.
While those payment methods can be a lifeline, they may also lead to financial instability.
“The rate of price increases is slowing, but households are still paying more today for groceries than they did last year,” said Kassandra Martinchek, senior research associate at the Urban Institute.

“That might mean that folks are having to rely on liquidity sources other than their income to be able to meet their very basic needs, their food needs,” she said.

It’s not just those who are most financially disadvantaged who are experiencing these challenges, according to Martinchek.

Expiring pandemic aid, inflation affect grocery bills

Consumers have been grappling with higher food prices since 2021. For some, coping with those costs has been more difficult as pandemic-era aid expired. Enhanced allotments to Supplemental Nutrition Assistance Program, or SNAP, benefits expired in March 2023, leading the average individual to receive about $90 less in benefits per month.
About 70% of all grocery transactions are through credit or debit cards, the research found. Those payment methods carry risks, especially for consumers who can’t pay off the balance in full.
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In 2023, the average annual percentage rates for credit cards rose to 22.8%, the highest rate on record, according to the Urban Institute.
“When that unused credit limit is there in front of you, sometimes it looks like a lifeline,” said Bruce McClary, senior vice president at the National Foundation for Credit Counseling. “In some circumstances, that lifeline is really a cinderblock.”

Grocery charges can lead to missed payments

While 33.4% of adults who used a credit card for groceries repaid the charges in full, 20% of adults paid less than the full balance but always paid the minimum payment. Meanwhile, 7.1% did not make the minimum payments.
Households with greater levels of food insecurity were more likely to use payday loans, buy now, pay later programs or savings to pay for basic needs, according to the Urban Institute.
Of those who used buy now, pay later for groceries, 37% of adults missed payments on those loans.
Adults with lower levels of food security were also likely to experience debt repayment challenges.

Certain policy changes could help alleviate those struggles, according to the Urban Institute research, such as increasing SNAP and other social safety net supports; expanding financial options to help families in need and making credit counseling and debt-management services more broadly available.
Individuals and families who are currently struggling can take steps to help avoid turning their grocery store visits into lasting debt balances.
By shopping with cash instead of credit, that can help limit spending to an exact amount, McClary said.
For debtors who feel stuck, talking to a nonprofit credit counseling agency can help with budgeting and managing debt, he said.
“If you can’t do it yourself, somebody’s there to help,” McClary said.

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In attempts to fix the country’s $1.6 trillion student loan system, the Biden administration has routinely announced forgiveness of large shares of that debt.
Here’s what to know about the aid programs that have led to that relief, including income-driven repayment plans and Public Service Loan Forgiveness.

President Joe Biden announces student loan relief with Education Secretary Miguel Cardona, right, in the Roosevelt Room of the White House in Washington, D.C., Aug. 24, 2022.
Olivier Douliery | AFP | Getty Images

In attempts to fix the country’s $1.6 trillion student loan system, the Biden administration has routinely announced forgiveness of large shares of that debt.
In total, the U.S. Department of Education has canceled almost $160 billion in federal student loan debt for nearly 4.6 million borrowers since President Joe Biden entered office.

Here’s what to know about the aid programs that have led to that relief.

Income-driven repayment plans

Income-driven repayment plans, which date back to 1994, allow student loan borrowers to pay just a share of their discretionary income toward their debt each month and to get any remaining debt forgiven after a set period. There are four different plans.
Many borrowers paid into the system for years without getting that promised cancellation, explained higher education expert Mark Kantrowitz.
“The loan servicers weren’t keeping track of the number of qualifying payments,” Kantrowitz said in an earlier interview with CNBC.
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The Biden administration has been evaluating millions of borrowers’ loan accounts to see if they should have had their debt forgiven.
It has also been granting borrowers who consolidate loans a one-time payment count adjustment. That gives them credit toward all their loans based on the one they have been making payments on for the longest, as well as for certain periods that previously didn’t count, including certain months spent in deferments or forbearances.
So far, nearly 1 million people have benefited from the improvements to income-driven plans, receiving almost $50 billion in debt cancelation.
Most people with federal student loans qualify for income-driven repayment plans. Options for these plans and applications are available at studentaid.gov. In some cases, borrowers will want to request a loan consolidation by June 30 to qualify for the Biden administration’s account adjustments.

Public Service Loan Forgiveness

Navigating the Public Service Loan Forgiveness program has been famously difficult. 
The program, which former President George W. Bush signed into law in 2007, allows employees of the government and certain not-for-profit entities to have their federal student loans discharged after 10 years of on-time payments.
The Consumer Financial Protection Bureau in 2013 estimated that 25% of American workers may be eligible.
However, after some borrowers got the wrong information from their servicers about the program’s requirements, many of them hit walls. Those borrowers frequently found that some or all of their qualifying payments didn’t count because they had a loan or were enrolled in a payment plan not covered under the initiative.

The Biden administration has tried to reverse the trend of borrowers being excluded from the relief on technicalities. It has broadened eligibility and allowed people to reapply for the relief, as long as they were working in the public sector and paying down their debt.
Some 876,000 public servants have gotten their debt erased as a result, amounting to more than $62 billion in relief.
With the PSLF help tool, borrowers can also search for a list of qualifying employers under the program and access the employer certification form. They can head to studentaid.gov to learn about all the program’s requirements.

Borrower defense

Another 1.6 million borrowers have been able to eliminate their debt over the past few years because of the Borrower Defense Loan Discharge. These people received more than $28 billion in relief.
You may be eligible for a full discharge of your Direct Loans, Federal Family Education Loan (FFEL) Program Loans or Federal Perkins Loans if your school closed while you were enrolled or if you were misled by your school or didn’t receive a quality education.

In processing these applications, the Biden administration has begun considering cases in a group rather than requiring each attendee of a school to prove that they were misled.
Those who think they might qualify can apply with the Education Department.

Total and Permanent Disability Discharge

The Biden administration has forgiven the student debt of more than 548,000 disabled borrowers. The $14.1 billion in aid was delivered under the Total and Permanent Disability, or TPD, Discharge.
The Department of Education has gotten better at identifying borrowers who are disabled and in need of this relief by accessing information from the Social Security Administration, Kantrowitz said.
Borrowers may qualify for a TPD discharge if they suffer from a mental or physical disability that is severe and permanent and prevents them from working. Proof of the disability can come from a doctor, the Social Security Administration or the Department of Veterans Affairs.

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About 33.4% of single-family homes available for sale in the first quarter were newly built, almost double from pre-pandemic levels, according to a new report by Redfin, a real estate brokerage site. 
“What’s happened is that the level of resale inventory has shrunk,” said Robert Dietz, chief economist of the National Association of Home Builders.
Homebuilders are still building about 1 million single-family homes a year.

Alistair Berg | Digitalvision | Getty Images

New builds may offer more flexible pricing

In a housing market that is plagued with low supply, buyers have been turning their attention to new construction because “there’s more opportunity,” Nicole Bachaud, senior economist at Zillow Group, recently told CNBC. 

Unlike existing home sellers, builders are typically more flexible when it comes to pricing. Builders can also offer buyers incentives like rate buy-downs and price cuts, as well as cover closing costs, experts say.
A little less than two-thirds of builders are using some kind of incentive to promote sales, Dietz said. Those can include amenity upgrades, mortgage rate buy-downs and some limited price cuts.
Only about a quarter of builders are using a price reduction, said Dietz. And those price cuts average out to around 5% to 6%.

The price gap between existing and new homes

The median sales price for new houses sold in the U.S. during March was $430,700, according to the latest data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
While new builds are still sold for slightly more than existing homes, the price gap has significantly narrowed.
“Prices are much closer to parity than during any point in the last three decades,” Matthew Walsh, assistant director and economist at Moody’s Analytics, previously told CNBC.

Over the last six months, the median price for a new home has become only about 4% higher than the median price of an existing house. That level is significantly lower than before the pandemic when the median price of a new home was more than 40% higher than an existing house, Walsh said.
The low supply of existing homes has caused prices to tremendously grow while prices for new builds tend to move based on interest rates, housing demand, the amount of competition for existing homes, and the cost of construction, Dietz explained.

What to keep in mind when buying a newly built home

If you decide to look into new construction, keep in mind that only about 10% of new homes available for sale are completed and can be considered move-in ready, Dietz said.
The bulk of new homes available can range depending on empty lots that are ready to be built on and different stages of construction, he said.
Today’s buyer needs “to be strategic, patient and flexible,” said Dietz, from considering different kinds of housing and locations to making design decisions.
Here are four things to pay attention to:
1. Consider a smaller house: Since 2021, homebuilders have been building a “slightly smaller product” to deal with the lack of affordability, said Dietz. Reducing the square footage of your home can help reduce construction costs as well as utility and maintenance costs down the line. Townhouses made up almost 18% of single-family housing starts for the first quarter of the year, according to NAHB data.
The size of new single-family homes continues to shrink: In the fourth quarter of 2023, the median single-family square floor area came in at 2,156 square feet, the lowest reading since the beginning of 2010, the NAHB found.
2. Be open about geographic location: New construction can be cheaper in more rural areas, Dietz said.
“Whether it’s lower regulatory costs or greater land availability, that can be a smart move,” he said.
3. Keep construction costs down: Major factors like lumber and labor costs significantly impact the cost of a new house. But, as the future homeowner, you have control over the finishes added to the house. And depending on the kinds of materials you add to the house, builders are “adding up the tab,” Veronica Fuentes, a wealth management advisor based in Washington, D.C., previously told CNBC.
To save on costs, focus on completing the structural elements of the house and stick to basic or lower-cost features during construction.

4. Be mindful of future costs: Allow room in your budget for costs to significantly change after the first year of owning a new build. For example, property taxes on newly built homes tend to increase dramatically after purchase because the initial rates are often based on estimates.
Make sure you research how often the county you’re considering reassesses property taxes and what that formula is based on.
But keep in mind that there can be other savings that offset those costs.
“When you’re buying a newly built home, you’re typically buying a home that’s more resilient, more energy efficient,” which can mean lower operating costs over the long run, Dietz said. More

Not all home renovations offer the same returns on investment.
Forget a designer chef’s kitchen, the top projects promising the greatest returns in resale value are mostly related to a home’s curb appeal, according to Zonda’s recent cost vs. value report.
“When it comes to adding resale value to a home, exterior replacement projects continue to make the most sense,” says Clay DeKorne, Zonda’s chief editor.

Home renovation activity may have cooled somewhat compared with its pandemic-era frenzy, but homeowners are still investing in their spaces, particularly as the spring housing market heats up.
And when it comes to the return on investment, some projects now offer the highest return values in history — with a few home upgrades averaging returns of nearly 200% for the first time ever — according to the 2024 Cost vs. Value report from Zonda Media, a housing market research and analytics firm.

Garage door replacements offered the highest average return at 194%, followed by upgrading to a steel front door, with a 188% return on investment — both worth nearly double what they were last year, the report found. 

Curb appeal is key

Forget a designer chef’s kitchen, the projects offering the greatest returns in resale value are mostly related to curb appeal rather than more glamorous kitchen and bath remodels, according to Zonda’s report.
In fact, nine out of the top 10 projects with the highest return on investment were exterior improvement projects, the report found.
“When it comes to adding resale value to a home, exterior replacement projects continue to make the most sense,” Clay DeKorne, chief editor of Zonda’s JLC Group, said in a statement.

However, with rising costs for construction labor and building materials, not everyone will get their money’s worth in improved home value.

Only three projects on Zonda’s list can typically deliver even a 100% return on investment, including replacing the garage doors, upgrading to a steel front door and installing a stone veneer.
“Discretionary projects like an upscale bathroom or kitchen remodel will feel valuable to those who make the selections but won’t provide nearly as much return to sellers,” DeKorne said.
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A minor kitchen remodel — such as painting and updating the backsplash — did provide high returns, at 96% of costs recouped. But major upscale kitchen and bathroom remodels did not, the Zonda survey found, with returns of 38% and 45%, respectively.
“Doing expensive upgrades on the kitchen aren’t going to pay off,” said Angelica Ferguson VonDrak, an associate real estate broker based in Rhinebeck, New York.

‘Un-sexy upgrades are more important’

With high home prices and a tight supply of homes for sale, sellers need to be especially strategic in their efforts to attract the buyers willing to pay top dollar in today’s market, according to Todd Tomalak, Zonda’s principal of building products research.
Further, financing renovations or improvements with a home equity loan or home equity line of credit have gotten more expensive along with the Federal Reserve’s string of 11 rate hikes since 2022, including four last year.
“A new garage door or new entry door can make a pronounced difference,” Tomalak said. “It could be the thing that makes one house stand out against all the others, making the home worth a higher price.”

Curb appeal is important in getting the right price from the right prospective buyer.
Dreampictures | Photodisc | Getty Images

To get the best bang for your buck, talk to a realtor in your area about specific renovations that may increase the value of your home and which ones to skip, VonDrak advised.
In some areas, putting in a pool could pay off threefold, in other locations, such a hefty investment can fall flat, she said.
“The un-sexy upgrades are more important,” VonDrak said, such as an HVAC conversion (replacing a fossil-fuel-burning furnace or boiler with an electric heat pump) or a new roof or windows.
And often, a thorough cleaning can go a long way, VonDrak said. “Certainly decluttering and swapping out old furniture for new or adding slipcovers,” she said. “You want everything to feel fresh and new.”

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Fears about Social Security’s future shouldn’t be the primary reason for claiming retirement benefits at the earliest claiming age of 62, experts say.
While those who wait eight more years until age 70 stand to get the biggest benefit checks, it can help to delay claiming even by a few months.

Aj_watt | E+ | Getty Images

A recent Social Security report showed a strong economy has helped the program.
Still, Social Security’s trust funds may be depleted in the next decade, if no changes happen sooner.

Many Americans have a misplaced worry that benefits will disappear.
“The biggest myth about Social Security is that when the trust fund runs out, the program is just going away,” said Emerson Sprick, associate director of the economic policy program at the Bipartisan Policy Center.

Even if Social Security’s trust funds are depleted, the program will still have revenue from payroll taxes. Benefits will still go out, though they may be reduced.
Nevertheless, 75% of adults ages 50 and up believe Social Security will run out in their lifetime, a 2023 Nationwide Retirement Institute survey found.

When people claim Social Security

Moreover, data shows retirees often don’t wait until they are able to receive 100% of the benefits they’ve earned.

The most popular age at which to claim is 62, with 29% of beneficiaries claiming at that earliest possible age in 2022, according to a Bipartisan Policy Center report based on Social Security Administration data.
But those beneficiaries take about a 30% benefit cut for not waiting until their full retirement age — the point when they stand to receive 100% of the benefits they’ve earned. The full retirement age is generally between 66 and 67, depending on an individual’s birth date.
Most beneficiaries — 62% — claimed before their full retirement age in 2022.
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Just 16% of retirees claimed at their full retirement age.
For every year beneficiaries wait past their full retirement age up to age 70, they stand to get an 8% benefit increase. But just 10% of claimants waited until age 70, according to the data.

Why people claim early

The top reason people claimed early was their worry that Social Security may run out of money and stop making payments, a 2023 Schroders survey found.
The second most common reason was that they needed the money, according to the survey.
Psychological factors may also prompt early claiming, according to recent research from professors Suzanne Shu at the Cornell University SC Johnson College of Business and John Payne at Duke University Fuqua School of Business.
Workers may feel a sense of ownership over the benefits they’ve earned, and consequently want to claim them as soon as possible, the research found.
Or they may be prompted by an aversion to losing money.

Every month increases your benefits

Nevertheless, experts say it’s still generally best to delay claiming retirement benefits.
“Everyone should know that you have a penalty if you collect before 70,” Teresa Ghilarducci, a professor at The New School for Social Research and author of the book “Work, Retire, Repeat: The Uncertainty of Retirement in the New Economy,” previously told CNBC.
Someone who is eligible for a $2,000 per month full retirement age benefit at 67 may instead get $1,400 per month if they claim at age 62, according to a Bipartisan Policy Center analysis. Waiting until age 70 would instead provide $2,480 per month.
While delays tend to be positioned in years, waiting even just months can help.
Delays of six months, 12 months or 18 months are “very helpful retirement security moves that you can make,” Sprick, of the Bipartisan Policy Center, said. And that still means retiring at age 62, 63 or 64.
“Viewing it that way, in months, can help some folks who really couldn’t make it years,” Sprick said.

Retirement experts agree on the value of delaying Social Security benefits — unless a personal reason such as a lack of income or poor health condition prompts a need to start benefits early.
Social Security benefits are adjusted annually for inflation, a feature generally unmatched by annuities or pensions.
Those cost-of-living adjustments are another reason it pays to wait to claim benefits, as those annual increases are higher when applied to larger benefit amounts. More