Most People Claim Social Security Too Soon

May 28, 2014 at 8:31 PM

When should you claim Social Security? The advice is generally to delay as long as possible. But according to a report issued today by the Government Accountability Office (GAO), middle-income retirees are much less likely than wealthy ones to take that advice.

For many people, it pays to defer claiming Social Security. While it’s possible to claim as early as age 62, for every year you wait between ages 62 and 70, your benefit will rise 6% to 8%. Delaying can make sense even for some who are unlikely to live long. The reason: When the higher earner in a couple delays, the survivor will inherit a higher lifelong income. (When one spouse dies, the other can choose whether to stick with his or her own benefit or switch to the deceased spouse’s.)

But as the GAO report shows, while middle- and lower-income workers would often benefit most from maximizing their Social Security (because they have relatively little in savings), many earners in that group are unable to wait that long.

Not surprisingly, the report found, those who delay claiming tend to be better off financially. Median income at age 72 from all sources (including savings and Social Security) for those who delayed claiming until full retirement age—which is 66 for those born between 1943 and 1954—was $51,200, versus $38,400 for early claimers.

The good news, according to the report, is that more people are delaying taking Social Security. While 43% of men and 49% of women born in 1935 claimed benefits immediately upon turning 62, for those born in 1946, the percentage who did so fell to 32% for men and 38% for women.

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Source: Market Watch

Category: Bizblog