Claiming Social Security Early Could Cost You $182,000, New Study Says

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Good things come to those who wait — including Social Security. According to a new study, if you wait until age 70 to start collecting benefits, you’ll end up receiving nearly $200,000 more than you would if you start claiming at the first eligible age of 62. 

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This is according to a new study distributed by the National Bureau of Economic Research and conducted by a team of researchers including economists at Boston University and a director at the Federal Bank of Atlanta who tabulated the effects of holding off on collecting Social Security. 

The researchers found that, though workers are first eligible to receive Social Security benefits at the age of 62, doing so will net up to 30% less over the course of a lifetime. But, waiting until 70 will provide a financial incentive of around $182,370. In addition, waiting for benefits will only cut an extra $2,714 on average from a worker’s income in those eight years, providing a drastic benefit for delaying Social Security.

What they also uncovered is that most Americans are not reaping these rewards — as MarketWatch recaps, “More than 90% of American workers should wait until the age of 70 to collect. Yet only 10% do so.”

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How Did They Get This Number?

The team came across their findings using an analyzation tool from Kotlikoff’s Economic Security Planning — Laurence Kotlikoff is a renowned financial expert, a professor of economics at Boston University, the president of Economic Security Planning and co-author of the New York Times bestseller Get What’s Yours: The Secrets to Maxing Out Your Social Security. They also utilized information from a survey of consumer finances conducted by the Federal Reserve.

As researchers noted, picked up by MarketWatch, “Young as well as older workers can gain from postponing Social Security benefit collection. Such delay does, however, come at a higher cost — far more workers becoming cash-flow constrained. On the other hand, the typical temporary living standard reduction is small.”

How Will This Impact Future Program Funding?

Another key advantage is the mass effect of a large proportion of workers delaying benefits on the overall cash value of the program, which has recently come under scrutiny. Even the Social Security Administration has noted it’s nearing depletion and there have been worries that it will run out of money before all workers can recoup their fair share they’ve been paying into over the course of their careers. 

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According to the SSA, “As a result of changes to Social Security enacted in 1983, benefits are now expected to be payable in full on a timely basis until 2037, when the trust fund reserves are projected to become exhausted.”

Yet, the new study found that the current value of the program would actually increase by 6%, or $3.4 trillion if a majority of Americans waited until age 70 to start their payments. And, they say, “If future generations also optimize, another $3 trillion cost would be incurred.”

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What Happens If You Can’t Wait to Collect?

Waiting until age 70 is just not possible for every person. As GOBankingRates.com reported in a story called, “What’s the Best Age to Take Social Security?” it’s said that “many retirees simply can’t afford to wait eight years after age 62 to start receiving benefits [and] Americans in poor health may fear not even surviving until age 70 or being in a condition where they’re unable to enjoy their benefits.”

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Yet, as this article shows, if you’re able to wait to collect, the rewards are significant. Each year that you delay claiming Social Security after age 67 will increase benefits by 8% annually. Putting a dollar amount to that finding, it means receiving an average $2,600 monthly benefit at the age of 67 could bump up to around $3,300 by age 70. “That’s just shy of the average annual return of the stock market, one of the best performing asset classes, without any of the risk.”

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About the Author

Selena Fragassi joined GOBankingRates.com in 2022, adding to her 15 years in journalism with bylines in Spin, Paste, Nylon, Popmatters, The A.V. Club, Loudwire, Chicago Sun-Times, Chicago Tribune, Chicago Magazine and others. She currently resides in Chicago with her rescue pets and is working on a debut historical fiction novel about WWII. She holds a degree in fiction writing from Columbia College Chicago.
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