Worth Waiting For? The Many Factors in Social Security Claiming 

To claim Social Security early or not to claim Social Security early, that is the question. 

And while it may not be as stressful as the ones Hamlet was grappling with, it’s a challenging one for many people, even if they understand how the government benefits work. While nearly 70% of the 1,500 non-retired Americans surveyed by Schroders understand that waiting would result in bigger checks, 45% plan to tap their benefits before age 67, which is currently the full retirement age for those born in 1960 or later. Only 10% said they plan to wait until 70, when benefits hit their maximum.  

The results suggest there is a meaningful gap between understanding a concept and acting on it, said Deb Boyden, head of US defined contribution at Schroders. But the issue is more nuanced than simple awareness of how waiting increases monthly checks. 

“People may understand the trade-off, but other factors often influence their decision,” Boyden said. “Financial pressures, concerns about the future of Social Security, health considerations or simply wanting access to benefits sooner can all play a role.” 

SS Soliloquy 

Of those who said they would start receiving Social Security before 70, 45% need the money earlier for regular income and 43% want access to the money ASAP. Four in 10 worried that the Social Security Administration may run out of money or halt payments. 

While waiting can result in larger checks, it’s not always the best move. In fact, 14% of the survey respondents said that they were advised to take Social Security earlier than 70. 

“Claiming earlier may make sense if you need the income, have limited savings or other income sources or have health concerns,” said Chandler Riggs, a financial consultant at Fidelity Investments. She recommends considering several factors: 

• Taxes, to start, since up to 85% of your Social Security benefit may be subject to federal income tax. “That also means at least 15% remains federally tax-free, so a larger monthly benefit could provide more tax-free income,” Riggs said. 
• How much a benefit can grow if you wait. Delaying after full retirement age generally increases benefits by 8% per year until age 70. A larger benefit also means more inflation protection in dollar terms. 
• Spouses. The higher earner’s claiming age can affect the benefit that may be available to a surviving spouse later. 

Methinks … Boyden suggested people think about when they’ll claim several years before they plan to leave the workforce. “Social Security is one of the most important retirement income decisions many Americans will make,” she said. “It has implications for monthly income throughout retirement.”