The Surprising Truth Behind Claiming Behavior
When it comes to retirement, one of the biggest financial decisions a person faces is when to start collecting Social Security benefits. The conventional wisdom for many financial planners is to wait as long as possible, up to age 70, to maximize the monthly payout. However, research reveals that most Americans do not follow this advice. The actual data shows a surprisingly low percentage of people delaying their claim to 70.
According to studies cited by financial outlets like CNBC and based on survey data from asset managers like Schroders, only about 8-10% of workers actually wait until age 70 to claim their Social Security benefits. This figure stands in stark contrast to the high percentage of people who would financially benefit from waiting, estimated by some economists to be over 90%. Understanding this paradox is key to making a well-informed decision for your own retirement.
Why Most People Claim Before Age 70
The reasons behind the low percentage of 70-year-old claimants are multifaceted and deeply personal. It is rarely a matter of ignorance, as many survey respondents are aware that waiting yields a higher payment. Instead, the decision is often influenced by a combination of practical needs and psychological factors:
- Financial Need: For many, the most pressing reason is the immediate need for income. Whether due to an unplanned job loss, depleted savings, or simply needing cash flow to cover daily expenses in retirement, starting benefits earlier is a necessity. A 2023 Schroders survey found 36% of respondents cited needing the money as a primary reason for not waiting.
- Health Concerns: The uncertainty of one's lifespan plays a critical role. If a person has a serious health condition or a family history of shorter lifespans, taking benefits early seems logical to ensure they collect for as long as possible. The concept of a "break-even" age (typically late 70s or early 80s) is key here, but it's a gamble few feel comfortable taking.
- Fear and Distrust of the System: A significant portion of the population is concerned that Social Security funds will run out or that benefits will be reduced in the future. As a result, they prefer to collect what they can now rather than risk a reduction later. A 2023 Schroders survey indicated 44% of respondents harbored this fear.
- Desire for Immediate Access: Some retirees simply view their Social Security contributions as their own money and want to access it as soon as they can, feeling a sense of entitlement to the funds they've paid in over a lifetime. This is a powerful motivator for immediate gratification over long-term optimization.
The Mechanics of Delayed Retirement Credits
For those who can afford to wait, the financial rewards are substantial and guaranteed. The Social Security Administration (SSA) provides delayed retirement credits for each month you postpone claiming benefits after your full retirement age (FRA), up to age 70. The annual credit rate is 8%, which is a powerful, risk-free return on your money.
For someone whose FRA is 67, waiting until 70 results in a monthly benefit that is 24% higher than it would be at FRA. This increase applies for the rest of your life and is also factored into future cost-of-living adjustments (COLAs), further protecting your purchasing power.
For more detailed information on how these credits are calculated, see the official guidance on the Social Security Administration's website: Benefits Planner: Retirement | Delayed Retirement Credits.
A Comparative Look at Claiming Ages
To illustrate the impact of claiming age, consider a hypothetical individual with a Full Retirement Age (FRA) of 67, whose monthly benefit at FRA would be $2,000. The following table shows how their monthly and potential lifetime benefits might change based on claiming age.
| Claiming Age | Monthly Benefit (as % of FRA) | Example Monthly Benefit | Break-Even Point (vs. 62) |
|---|---|---|---|
| 62 | ~70% | $1,400 | N/A |
| 67 (FRA) | 100% | $2,000 | Early to mid-80s |
| 70 | 124% | $2,480 | Late 70s to early 80s |
Note: Break-even points are estimates and vary based on individual circumstances and life expectancy. The example assumes consistent benefits without factoring in COLAs.
Impact on Spousal and Survivor Benefits
The claiming decision is not only about the individual; it also has profound implications for a spouse or dependents. If the higher-earning spouse delays claiming, it boosts the potential survivor benefit for the lower-earning spouse. This can be especially critical for the surviving partner's financial security, as they will receive the higher of the two benefits.
Navigating the Personal Decision
While the financial argument for delaying is strong, it is not a one-size-fits-all solution. Your personal circumstances, including health, family history, overall retirement savings, and need for income, must be considered. Ultimately, the best age to claim benefits is a personalized decision that balances maximizing your monthly check with your immediate financial needs and longevity expectations. Consulting a financial advisor who understands your full financial picture can provide valuable guidance.
