Why do so many claim Social Security benefits early?
Under normal circumstances, the earliest that you can claim your Social Security benefits is age 62. Doing that however condemns you to a permanent reduction in benefits that could cost you thousands if not hundreds of thousands of dollars over your lifetime.
Did you realize that the difference in monthly Social Security income can be 76% higher if you wait until age 70 vs. age 62? That difference would then pay you that much more for the rest of your life.
I realize that circumstances may lead a woman no choice but to start taking her benefits earlier than age 70. I understand, but all too often a woman is not being educated on the consequences of taking her Social Security benefits early as opposed to later.
How long do you think you will live?
Life expectancy is the great mystery attached to the decision as to when to collect your Social Security benefits. Do you have longevity in your DNA or did members of your immediate family not live long lives?
Other factors can determine a woman’s longevity. In general, higher incomes and higher educational levels can determine a woman’s longevity. A higher income can translate into better health care options leading to better overall health.
The same goes for education, in general the better educated a woman is about her health, the better she tends to take care of herself leading to a longer life.
Waiting to claim is money in your pocket!
By foregoing even one year of claiming your Social Security benefits, you are increasing your benefits by 8% guaranteed. Where can you get a guaranteed 8% today?
A study done in 2022, (Altig, Kotlikoff & Ye), found that by optimizing one’s Social Security benefits, a woman can increase her lifetime spending by as much as 26%.
One possible reason that some choose to claim early and not let their benefits compound by 8% each year is that people believe that they “own” the money that they put into the Social Security system. Therefore if they own the money, they want their money as soon as they can get it.
Waiting any longer than age 65 would mean giving up their money that they already own. This “loss aversion” of not getting your benefits ASAP is stronger than the “risk aversion” of lowering your monthly Social Security benefit and running out of money.
The perception that benefits are owned by you.
When asked on a scale of 1-7 how much they agree with “I deserve the payments now that I contributed to over my working life.” The higher the rating, the higher their personal aversion to loss was deemed to be and more likely to claim Social Security benefits early.
What I found interesting while reading the study was the fact that if the person was talked to about “live to age” rather than “die by age”, people were more willing to delay claiming Social Security benefits resulting in higher monthly payments for the remainder of their lives.
We can help you make the best decision.
At Retirement Solutions, we use computer software to help a woman determine when is the best time to claim her benefits. The decision making process can be made much easier and result in a higher lifetime payout to a woman.
If you would like to learn more about this opportunity, please click the “Schedule a Consultation” link in the upper right corner of this page. The 15-minute consultation is without obligation nor cost. You talk, we listen, no pressure, we promise.