Just because something is widely done doesn’t make it the smartest choice. In much the same way, age 62 is the most common time for Americans to start claiming Social Security, but that doesn’t mean it’s the wisest financial move.
Billions Left on the Table
According to a report released in 2019 by United Income (an investment and financial planning firm) retirees in the U.S. are potentially missing out on $3.4 trillion in lifetime income because they claim Social Security too early. The report was backed by experts including a former chief economist and a former research director from the Social Security Administration (SSA).
Their analysis found that 92% of retirees would stand to financially gain by waiting until the age of (at least) 65 before claiming their benefits. Even more striking, 71% would gain the most by waiting until age 70.
Why Waiting Pays Off
The Social Security system is structured to encourage patience. If you claim before reaching your full retirement age (FRA), which is 67 for citizens born in 1960 or after, your benefits are reduced. Specifically, your monthly payment is cut by about 5/9 of 1% for each month you claim before FRA, for up to 36 months. If you retire even earlier than that, the reduction deepens to 5/12 of 1% for every additional month.
If you start claiming Social Security at 62 instead of waiting until your FRA of 67, you’ll take a hit and your monthly checks could be around 30% smaller. But if you can afford to wait, there’s a big upside. For every month you delay past 67, your benefit keeps growing, roughly two-thirds of a percent more per month, all the way until age 70. That adds up to about 24% more each month, which can make a big difference in your retirement income.
Longevity Matters
While it’s true that delaying benefits can lead to higher payments, it’s also important to factor in life expectancy. According to actuarial data from the SSA, a 62-year-old man can expect to live another 19 years, and a woman about 22 years. With those lifespans, many Americans would end up receiving more in total benefits if they delayed claiming, especially to age 70.
New Research Backs It Up
The 2019 findings weren’t a fluke. A follow-up study in 2022 by researchers from the Federal Reserve Bank of Atlanta and Boston University, published through the National Bureau of Economic Research, came to a similar conclusion. The team found that more than 90% of Americans between the ages of 45 and 62 would be better off delaying benefits past age 65.
It’s Not Just About the Numbers
Of course, personal circumstances vary. Health problems, family medical history, and life expectancy can all affect whether delaying benefits makes sense for you. If you don’t expect to live well into your 80s or 90s, starting earlier might make more sense despite the reduced monthly benefit.
It’s also worth noting that studies like this focus purely on financial outcomes. Retirement decisions are deeply personal and often involve more than just money, such as lifestyle, job satisfaction, caregiving responsibilities, or just the desire to enjoy life sooner rather than later.
What the SSA Recommends
In its own guidance on retirement benefits, the SSA notes that the decision is a personal one, and the key is to be informed. Each person needs to consider their own situation before deciding when to file.
A Little-Known Bonus
While most retirees focus on the basics, there are also lesser-known strategies that can help maximize Social Security income. Some of these approaches could boost benefits by thousands of dollars annually, even as much as $23,760 more per year in certain situations. Learning about spousal benefits, delayed credits, and taxation strategies can help you make the most of your benefits.