It’s no secret that waiting until age 70 to file for Social Security retirement benefits guarantees you the biggest payment — and filing early is almost always a financial mistake. Delaying benefits to age 70 can boost your monthly payment by 77% vs. claiming them at age 62, when you first become eligible. Even waiting until 70 vs. age 67 to file for benefits can increase your check by 24%.
Yet the vast majority of Americans choose to collect Social Security earlier than age 70, according to a new survey from Schroders, an investment management firm.
The 2023 Schroders U.S. Retirement Survey, which polled 2,000 U.S. investors, found that 90% of respondents plan to file for Social Security benefits before age 70. That’s the case even though 72% of non-retired Americans are aware they could receive higher Social Security payments by delaying.
More than four in 10 (44%) said they would take benefits before 70 because they are concerned Social Security might run out of money or stop making payments (even though that’s not likely to happen anytime soon). Another 36% said they need the money before reaching age 70.
When asked to forecast how much monthly income they will need to enjoy a comfortable retirement, non-retired survey participants said it would be $4,940, on average. The average response for millennials was $5,135 per month, while those who are nearing retirement (ages 60-65) said $4,855 per month.
Filing for Social Security earlier than age 70 means many of them will leave a whole lot of money on the table.
As previously reported by GOBankingRates, waiting until age 70 vs. 62 to claim Social Security would boost recipients’ lifetime discretionary spending by a median $182,370 in today’s dollars, according to a study conducted by David Altig of the Federal Reserve Bank of Atlanta, Laurence Kotlikoff of Boston University and Victor Yifan Ye, a research scientist at Opendoor Technologies.
If you retire in 2023 at full retirement age (66 or 67 years old), your maximum monthly benefit would be $3,627, according to the Social Security Administration. If you retire at age 62, your maximum benefit would be $2,572. At age 70, your maximum benefit would be $4,555.
So why are so many people willing to sacrifice money by claiming early? Deb Boyden, Schroder’s head of U.S. Defined Contribution, blamed a “crisis of confidence” in the Social Security system.
That crisis likely has to do with a looming funding shortfall tied to Social Security’s Old Age and Survivors Insurance (OASI) Trust Fund. The OASI is expected to run out of money as early as 2032 or 2033, leaving the program solely reliant on payroll taxes for funding. Those taxes will only cover about 77% of current benefits. Proposals to deal with the shortfall usually involve either cutting benefits or raising payroll taxes.
“Fear about the stability of Social Security has people walking away from money that could improve their quality of life in retirement,” Boyden in a press release. “Many are not even waiting for their full benefit let alone the maximum, which means they will have to create more income on their own, making it even more important to save and invest earlier for retirement.”
