Social Security supplies a substantial share, and often the majority, of a retiree’s income. For these older workers delaying signing up for their benefits is often a smart strategy.
For every year they wait, the delay will increase the size of their monthly checks by 7 percent or more.
But, as researchers Suzanne Shu and John Payne point out in a newly published study, that is not what many people do. They explored the reasons so many sign up soon after they turn 62 and become eligible. They also may have found a way to present information about benefits that helps workers make the smarter choice.
People may be starting their benefits early for sound financial reasons. In a Great Recession survival strategy, for example, laid-off baby boomers were claiming their benefits early. But there are also psychological reasons for prematurely starting Social Security even when it doesn’t make financial sense. That’s what this study investigates.
One reason is that workers, after years of payroll taxes being deducted from their paychecks, feel a sense of ownership about their future benefits – and they are eager to claim what is theirs. The individuals in this study who said in an online survey that they intend to start Social Security on the earlier side expressed a strong feeling of ownership, agreeing with the statement they had “earned these retirement benefits.”
Another important reason people sign up sooner is the natural human aversion to losing, which this survey gauged by asking the participants to choose what type of gamble they would be willing to take. They were considered to be more loss averse if they chose a gamble that would have a high probability of either a $400 gain or a $400 loss over the riskier gamble in which they could either win $800 or risk a larger $600 loss.
One group with the opposite tendency – a willingness to delay benefits – was people who predicted they would live longer. In this case, the reasoning might be that, given the low balances in workers’ 401(k) accounts, they may be concerned about running through that source of income quickly in retirement. Lacking adequate savings to get through old age, the larger check that comes with delaying Social Security will help.
Delaying as long as possible is probably the right strategy for workers who haven’t saved enough on their own. But how to convince them? To try to influence the decision, the researchers tested a couple of ways of presenting their future benefit information to the workers in their study.
One group saw a chart that listed how much a hypothetical worker could expect in his monthly Social Security check, ranging from $1,339 at age 62 to $2,395 at 70.
A second group’s chart totalled up the lifetime benefits. The retiree who signed up for the $1,339 check at 62 would accumulate a total of $353,500 in benefits if he lived to 85. But if he waited until 70, the $2,395 benefits paid every month would add up to $402,360.
The people who saw the larger lifetime totals said they would claim their benefits much earlier.
The reason they were put off by the larger amount may come back to the psychological phenomenon of loss aversion. Seeing that larger dollar figure apparently heightened their fear of loss.
Perhaps seeing the totals made them “more impatient for receiving it,” the researchers said.
To read this study by Suzanne Shu and John Payne, see “Social Security Claiming Intentions: Psychological Ownership, Loss Aversion, and Information Displays.”
The research reported herein was derived in whole or in part from research activities performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement and Disability Research Consortium. The opinions and conclusions expressed are solely those of the authors and do not represent the opinions or policy of SSA, any agency of the federal government, or Boston College. Neither the United States Government nor any agency thereof, nor any of their employees, make any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report. Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsem*nt, recommendation or favoring by the United States Government or any agency thereof.
FAQs
Taking Social Security early reduces your benefits, but you'll also receive monthly payments for a longer period of time. On the other hand, taking Social Security later results in fewer checks during your lifetime, but delaying means each check will be larger.
What does the average 62 year old get from Social Security? ›
According to the SSA's Office of the Actuary, retired-worker beneficiaries who were 62 years old in December 2023 received an average check of $1,298.26.
How long does it take to get your first Social Security check at 62? ›
Your first check won't arrive until the month after the one you pick in your application. You can apply any time up to four months before the month you pick.
What disadvantage would be experienced by person applying for their Social Security benefits at age 62? ›
The most common disadvantages include: Reduced benefits – If you wait until you turn 65 years old, you can receive the full available benefits each month. However, applying for Social Security at 62 means your monthly payments are at a reduced amount.
Why do smart people take Social Security at 62? ›
Claiming Social Security when you're 62 could make early retirement affordable when it wouldn't otherwise be. If you're miserable at work -- or can't work anymore due to health issues or an inability to find a job -- claiming Social Security so you can leave the workforce could save your sanity or your life.
Is it a mistake to take Social Security at 62? ›
You may not be able to predict your future health status, but you can rely on the simple fact that if you claim early versus later, you will likely have lower benefits from Social Security to help fund your retirement over the next 20-30+ years.
What is the average Social Security check at age 62 in 2024? ›
Social Security offers a monthly benefit check to many kinds of recipients. As of July 2024, the average check is $1,782.74, according to the Social Security Administration — but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.
What is the minimum Social Security payment at age 62? ›
What is the minimum Social Security benefit at age 62? The youngest age at which you can begin claiming the minimum Social Security benefit is 62. In 2024, the special minimum Social Security benefit for retirees at age 62 will be around $2,710.00 per month.
What is the maximum Social Security check at age 62? ›
The maximum benefit depends on the age you retire. For example, if you retire at full retirement age in 2024, your maximum benefit would be $3,822. However, if you retire at age 62 in 2024, your maximum benefit would be $2,710. If you retire at age 70 in 2024, your maximum benefit would be $4,873.
How close to your 62nd birthday should you apply for Social Security? ›
You can apply for retirement benefits up to 4 months before you want to start receiving your benefits. Even if you are not ready to retire, you still should sign up for Medicare 3 months before your 65th birthday.
You may request that your benefit begin in August with the first payment in September. By requesting that your benefit begin in your birthday month, you will receive the maximum possible monthly payment for the rest of your life.
Do you have to notify Social Security when you turn 62? ›
To avoid delays due to processing time, SSA encourages workers to contact an SSA office 2-3 months before reaching age 62 (SSA 1997A, paragraph 1503), and workers may file applications before the first month in which they are entitled.
What is the #1 reason to take Social Security at 62? ›
It's possible your current living expenses may surpass your Social Security benefit amount, so you decide to take your benefits early because you can't wait for a larger payout later. Or, you're drowning in debt, and taking benefits now will help.
Why you should not draw Social Security at 62? ›
For example, if you turn age 62 in 2024, your benefit would be about 30% lower than it would be at your full retirement age of 67. Some people will stop working before age 62. But if they do, the years with no earnings will probably mean a lower Social Security benefit when they decide to start receiving benefits.
Why do most people get denied for Social Security? ›
Here are some common leading reasons claims are often denied: Lack of medical evidence. Prior denials. Too much earnings.
What percentage of people start Social Security at age 62? ›
And as of 2021, according to the Congressional Research Service, about 30% of Social Security applicants were 62.
What does Dave Ramsey say about taking Social Security at 62? ›
Dave Ramsey said you can claim Social Security at 62 if you're going to invest every dollar. Most retirees can't do this, and many shouldn't even if they can, because investing money you're going to need really soon can be too risky.
What is the break even point if you take Social Security at 62? ›
At around age 78 and 8 months, you reach the break-even point, when your cumulative benefits from claiming at 67 surpass those you'd get by taking retirement at 62.
Should my wife start collecting Social Security at 62? ›
A spouse can choose to retire as early as age 62, but doing so may result in a benefit as little as 32.5 percent of the worker's primary insurance amount. A spousal benefit is reduced 25/36 of one percent for each month before normal retirement age, up to 36 months.
