Wait It Out

A study finds almost everyone claims Social Security at the wrong time

According to a new report, almost everyone claims Social Security at the wrong time. A study from United Income, a money management company for retirees, found that 96 percent of Americans choose a “suboptimal” time to claim their monthly checks. Claiming early, in particular, leads to lots and lots (and lots) of lost cash.

Social Security is a big part of retirement for many people. The United Income report found that about 50 percent of current retirees say that Social Security makes up more than half of their yearly income, and 28 percent claim it makes up more than 75 percent. It seems like everyone needs Social Security, but they’re not ensuring it pays out the most it can. The earliest you can claim Social Security is 62. However, the best time to claim your payments is 70.

The United Income report analyzed 2,000 American households and found that just 4 percent of people claim their Social Security at 70. Those early claims have resulted in more than $3.4 trillion in total, collective losses. The average retiree who takes Social Security at a suboptimal time (any age other than 70) will lose out on an extra $111,000. While the researchers said 70 was the optimal age for most people, there are exceptions to the rule — like those with chronic illnesses, etc.

The researchers behind the study theorize that the main reason people claim their checks too early is that it’s psychologically difficult. In essence, you’re trying to figure out how long you’re going to live. The fix? The authors of the report suggest using savings in your 60s (if you have to) in order to guarantee a larger Social Security check later. If you claim at the right time, the report estimates income during your 70s and 80s will increase by more than 25 percent. Patience is a virtue… and a bigger payday.

Chris O'Shea

Chris O'Shea