Americans are claiming Social Security too early
A new study from Schroders Investment Management has revealed that the vast majority of Americans plan to take Social Security benefits early, despite losing out on higher monthly payments. The research found that 9 in 10 working Americans say they won’t wait until age 70 to start collecting benefits — a move that could cost them tens of thousands of dollars in lifetime income.
Social Security allows workers to start claiming benefits as early as age 62, but doing so results in about a 30% reduction in monthly payments compared to waiting until full retirement age (67). On the other hand, holding off until age 70 boosts those payments by roughly 24%. Yet, only 10% of survey participants said they plan to wait until 70.
The financial difference can be dramatic. One study estimates that filing early can cost retirees up to $182,000 in lost payments over their lifetime.
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Why so many are filing early
While financial advisors strongly encourage delaying Social Security to maximise benefits, many Americans say that’s simply not realistic. According to Deb Boyden, head of U.S. defined contribution at Schroders, the decision to file early is not a mistake — it’s a reflection of economic reality.
“The decision to sacrifice extra Social Security income is not an oversight,” Boyden told CBS News. “Most Americans know that waiting longer increases payments, but they need the money as soon as they retire.”
With inflation straining household budgets, rising housing costs, and savings gaps growing wider, millions of Americans depend on Social Security to make ends meet immediately after leaving the workforce.
Breaking down the numbers
Social Security’s online calculator shows how delaying benefits affects payments, and the math is eye-opening. For example, someone with an average benefit of $2,000 a month at full retirement age would receive only about $1,400 a month if they claim at 62.
That adds up to $134,400 in total benefits by the time a person who waited until 70 even starts collecting. The higher payment at 70 — about $2,480 a month — would take more than 10 years to “catch up” to what an early filer already received.
This makes the “break-even” age around 80 years old. For some seniors, particularly those with health issues or shorter life expectancies, waiting simply doesn’t make sense.
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Americans’ knowledge gap about Social Security
The Schroders findings line up with another report from the Allianz Center for the Future of Retirement, which found that most Americans don’t fully understand how Social Security works or how it fits into their retirement plans.
About 20% of workers said they expect Social Security to provide all of their retirement income—even though the programme is designed to replace only about 40% of pre-retirement wages.
This misunderstanding underscores the need for better financial education. Many workers underestimate how much savings or supplemental income they’ll need in retirement.
Concerns about Social Security’s future
Fear about the future of Social Security also plays a major role in why many Americans claim early. Some believe the money “won’t be there” if they wait too long.
While the programme is facing a financial crunch, it won’t disappear entirely. The Social Security Board of Trustees projects that the programme’s trust funds could become insolvent by 2034.
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The growing retirement income gap
Today’s retirees report earning an average of $3,250 a month, according to the Schroders study. But non-retired Americans say they’ll need at least $5,032 per month to feel comfortable — a shortfall of nearly $1,800.
Rising living costs, student loan debt, and higher rents are making it harder for younger Americans to save. A Goldman Sachs analysis found that three-quarters of working adults under 40 are struggling to set money aside for retirement.
