Why Most Retirees Do Not Wait Until 70
While delaying Social Security benefits until age 70 guarantees the maximum monthly payout, data consistently shows that most Americans claim much earlier. For example, a 2023 study by Schroders indicated that only about 10% of non-retired Americans plan to wait until age 70. This trend is not a matter of ignorance, as the same study found that 72% of investors are aware that waiting longer leads to higher payments. This discrepancy between knowledge and action highlights the complex motivations and constraints retirees face.
Factors Influencing Early Claiming
Several key factors contribute to the low percentage of people who wait until 70:
- Fear and Uncertainty: A significant portion of respondents in the Schroders survey (44%) expressed fear that Social Security might run out of money. This fear, fueled by political rhetoric and general economic anxiety, pushes many to take their benefits as soon as possible, fearing potential cuts in the future.
- Immediate Financial Need: Many retirees simply need the income sooner rather than later. Whether due to job loss, health issues, or insufficient savings, immediate financial need often overrides the long-term benefit of delayed claiming.
- Desire for Immediate Access: Some individuals feel that because it is their money, they want access to it as soon as they can, without waiting. This can be a mindset of wanting to enjoy the fruits of their labor rather than deferring the payout.
- Health Concerns: For those with pre-existing health conditions or shorter life expectancies, taking benefits earlier can be a calculated decision. The break-even point for delayed claiming is typically in one's early 80s, so those who expect a shorter lifespan may decide against waiting.
- Misinformation and Poor Advice: Although more people are aware of the benefits of delaying, some still receive poor advice or make decisions based on incomplete information.
The Incentive of Delayed Retirement Credits
For those who do choose to wait, the reward is substantial. By delaying beyond their full retirement age, which is between 66 and 67 depending on the birth year, retirees can earn Delayed Retirement Credits (DRCs). These credits increase a person's monthly benefit by 8% per year until age 70, when the credits stop accumulating. This compounding effect means that someone with a full retirement age of 67 who waits until 70 could see their monthly benefit increase by 24%. For those born between 1943 and 1954, delaying until age 70 means receiving 132% of their full retirement benefit. This is often touted as one of the best risk-free investments available.
A Deeper Look at Claiming Demographics
The decision to claim Social Security is influenced by a range of personal and demographic factors. While broad percentages show overall trends, more nuanced data reveals interesting variations.
Comparison Table: Why People Claim Social Security Early vs. Late
| Reason for Claiming | Early (Before Full Retirement Age) | Late (At Age 70) |
|---|---|---|
| Primary Motivation | Need for immediate income due to job loss, illness, or insufficient savings. | Desire to maximize monthly benefits for higher lifetime income and survivor benefits. |
| Financial Situation | Often tied to limited assets and a reliance on Social Security for a substantial portion of retirement income. | Typically associated with higher earners who have other retirement assets and don't need immediate income. |
| Risk Tolerance | Lower tolerance for risk, driven by the fear that benefits could be reduced or that they may not live long enough to break even. | Higher tolerance, viewing the delay as a strategic financial investment with a high, guaranteed return. |
| Health Status | Health issues or shorter life expectancy can lead to a decision to claim sooner. | Generally healthier individuals who anticipate a longer lifespan and more years to enjoy the higher payments. |
| Spousal Considerations | Less common, as claiming early can reduce potential survivor benefits for a spouse. | Strategic decision, especially for the higher-earning spouse, to maximize the survivor benefit for the lower-earning partner. |
The Real-World Impact
The choice of when to claim Social Security has profound real-world consequences, both for individuals and the broader economy. For individuals, claiming early can lead to a significantly lower standard of living throughout retirement, especially if they have a long life expectancy. The reduced benefit, though a short-term fix for cash flow, is permanent and cannot be reversed.
On the other hand, for those who successfully delay, the higher monthly benefit provides a powerful, inflation-protected income stream for life. This can provide greater financial security, especially in later years when other retirement savings might be depleted. The decision is especially critical for couples, where a savvy strategy can maximize the total lifetime benefits for both partners, particularly ensuring the higher-earning spouse's benefit is passed on as a survivor benefit.
Conclusion: The Path Forward
Ultimately, the small percentage of people who take SS at 70 is a symptom of a larger issue: a complex interplay of financial stress, fear, and a lack of personalized retirement guidance. While the mathematical advantage of delaying is clear for most, it often fails to account for the real-life pressures and uncertainties faced by retirees. Bridging this gap requires both improved financial education and accessible, unbiased advice to help people make the best decision for their specific circumstances, not just for the theoretical maximum benefit. By addressing the root causes of early claiming, more retirees might be empowered to secure their financial future by waiting for their maximum Social Security benefit.
For more detailed information on your specific claiming options, you can consult the Social Security Administration's online tools. Get Your Social Security Statement
