Opinion | Yes, Most People Probably Should Hold Off on Claiming Social Security

I got a ton of mail on my Monday newsletter about why so many people claim Social Security benefits early. A lot came from readers defending their decisions to start drawing benefits as early as age 62 rather than waiting until 70, the age that I wrote is actually ideal for many people.

“The reason people take Social Security ASAP is because they need the money!” Peggy Bishop of Carlsbad, Calif., wrote. “What’s so hard to understand about that?”

Todd Grant of Deming, Wash., wrote, “To insinuate that people are claiming early for reasons that are not well thought out or understood is shaming and stress-inducing.”

People get just 70 percent of their full Social Security benefit if they claim at 62, the full benefit at 67 and 124 percent of the benefit if they claim at 70, as I explained.

Many readers said that while they didn’t absolutely need to start collecting Social Security early, they calculated that they would come out ahead by investing some or all of their checks in the stock market rather than waiting. Several even sent me their spreadsheets. I’ll get to those in a minute.

I acknowledge that there are legitimate reasons to claim early, some of which I mentioned on Monday and some of which I found out about from your emails. (Thanks again to my smart readers.) But as a general rule, I stand by what I wrote. The most important reason is also the hardest to explain, so I’m going to leave it for the end. And I should say, if it’s not already clear, that I am not a financial adviser.

I agree with Peggy Bishop that some people simply have to collect Social Security at the first opportunity. Maybe they have big expenses, or heavy debts, or lost their jobs or are burned out and need to retire. They don’t have enough savings to tide them over to age 70 without Social Security. Also, as I wrote Monday, if you have reason to think you will die young, collecting early makes perfect sense.

Saying you should delay claiming Social Security when possible is not the same as saying you should keep working past the breaking point of body and soul. I agree with the labor economist Teresa Ghilarducci, who in a book published this year (which I wrote about) said that the main solution to America’s retirement crisis isn’t working longer but shoring up retirement benefits. That said, if you can manage to delay claiming even though you’ve stopped working, you’ll likely come out ahead.

Readers brought up other cases where claiming early might be the right decision, although it’s impossible to generalize. One is if you have children living at home who can also collect benefits because you’re retired. Another is if you are the younger, lower-earning member of a couple; it might make sense for you to claim early while your spouse waits to 70. But it works only if your spouse dies first and not very old.

Some people may choose to collect early because they want to travel and enjoy life while they’re still healthy. That’s fair, although it would be more profitable to scrounge up the travel money without starting Social Security if possible. Likewise, if you can’t sleep at night worrying about the risk of delaying Social Security, then you need to do what’s right for your own peace of mind and forget what the economists say.

Some readers said that if they wait until age 70 they’ll have only a few years to enjoy the checks. Life expectancy at birth was 73.5 years for men and 79.3 years for women in 2021, according to the Social Security Administration’s 2024 Trustees Report. But if you’ve managed to survive until 62 your odds are better: Life expectancy at that age was 81 for men and 84.1 for women.

A reason I heard again and again for collecting early is the fear that benefits will be cut to deal with the system’s financial imbalance. The Times published an article about those worries on Thursday. “I expect reduced benefits or means testing to be introduced at some point, so I might as well get what I can now,” Eric Eidsmoe of Midland, Mich., who just turned 62 and decided to take Social Security right away, wrote to me.

It’s plausible that Congress might increase taxation of Social Security benefits or apply a less favorable cost-of-living adjustment, for example. On the other hand, I don’t think any future Congress will drastically reduce benefits for current recipients. That would be political suicide — retirees are a powerful voting bloc — as well as unfair to people who are too old to go back to work to make up the difference. That’s why more of the burden of fixing Social Security is likely to fall on current and future generations of workers, who have more ability to absorb the hit — say, by working longer.

On the political point, another group of readers made clear just how risky it would be for Congress to reduce benefits for current recipients. They strongly disliked my line that Social Security is “the government’s money.” M. Scott Owitz of Shokan, N.Y., wrote: “I paid that money, it is my money, matched by my employer, sweated out over 41 years of nursing practice. Don’t believe for one second it’s the government’s money.” (I continue to insist that people don’t own their projected Social Security benefit the way they own the money in their 401(k). Each generation pays taxes to the government to cover benefits to their elders, not themselves. But that’s a topic for another day.)

Now let me get to the most common reason people gave for claiming early, and why I think that it’s attractive but wrong. It’s the idea of comparing the return on delaying your Social Security with the return on taking your checks early and investing them.

On this point I consulted with Laurence Kotlikoff, a Boston University economist who sells the financial-planning software Maximize My Social Security and MaxiFi Planner and was one of the authors of the 2022 study that my Monday newsletter mentioned.

For starters, Kotlikoff said, investing in the stock market is highly risky, and the risk of a very large decline in your assets increases over time. It’s like the cone of uncertainty for a hurricane’s path: the farther into the future, the bigger the chance of an extreme deviation from the central tendency. In contrast, the check you get from Social Security gets about 8 percent bigger for each year you delay (versus roughly 10 percent annual gains for stocks), and that’s guaranteed, aside from the political risks I mentioned above. Plus the benefit is adjusted annually for inflation.

Instead of comparing the “yield” on Social Security with that of stocks, compare it with something that it more closely resembles: TIPS, or Treasury Inflation-Protected Securities, which are backed by the full faith and credit of the federal government and cover you against inflation. Thirty-year TIPS are currently yielding about 2.3 percent a year.

Another point in Social Security’s favor is that you are an individual, not an average. Yes, on average stocks do better. But if you personally run out of money before you die because you plowed more money into stocks instead of opting for a bigger Social Security benefit, it will be cold comfort that on average stocks tend to outperform.

Longevity matters a lot. As Suzanne Shu of Cornell and John Payne of Duke found in a paper last year, some people want to collect early to reduce the risk that they’ll die young and effectively get ripped off by the system. But as Mary Jo Napoli of Columbus, Ohio, astutely pointed out, if you die young you won’t regret it because you’ll be dead.

The break-even point — where the money you get from delaying exceeds the money you get from collecting early — gets talked about a lot, but is the wrong framework for decision-making. That’s because Social Security is old-age insurance, not an investment. (It’s right there in the official name.) It keeps paying no matter how long you live, even to 120, when your 401(k) is down to $4.01. “Economics says to value benefits through your maximum, not your expected, age of life,” Kotlikoff wrote in an email.

Think of Social Security like fire insurance. For most people, the premiums they pay for fire insurance will vastly exceed the benefits they collect, because their houses won’t burn down. That doesn’t make fire insurance a bad deal; people don’t feel cheated if their houses aren’t engulfed in flames. Similarly, giving up that early benefit is the price you pay for extra insurance — in the form of bigger checks later — against the risk of living a very long life. As I wrote Monday, it can even pay to use up some of your retirement savings now so you can delay claiming Social Security.

I realize that this isn’t what you hear from a lot of financial planners, or even from Social Security itself. Several readers told me that they went to Social Security offices to discuss when to start their benefits and were advised to claim early. Some said they were told that they could get tens of thousands of dollars if they backdated their claiming age to six months earlier. The lure of instant cash could cause a lot of people to make poor decisions. In an email to me, the Social Security media relations office said the claiming date is “a personal decision,” adding, “People should remember that by choosing to start their benefit earlier, their monthly benefit amount may be lower for the rest of their life.”

I like the way Jeffrey Horton of Green Valley, Ariz., summed things up in his email: “If recipients understood that they are in fact buying something valuable with their deferral at age 62 (not only receiving an increased payment at age 67, but also addressing their longevity risk), they might be persuaded to take advantage of what the government is offering.”

The Readers Write

You wrote, “The Election’s Other Biggest Losers? Economists.” Not just economists, but physicians and scientists too — and diplomats and the intelligence community.

Russell Bell
Albuquerque, N.M.

Maybe the Democrats need to start moving left. You can’t deliver the goods by staying just one step to the left of the Republicans. Start with a campaign to raise the federal minimum wage?

Greg Talcott
Siler City, N.C.

Stock markets up across the board. If Trump’s policies are so bad, why? Give Trump 2.0 a chance; it may turn out better than you think.

Bill Hoke
Santa Fe, N.M.

I would be very interested in seeing you actually go live in and among the working class for a few months and read the articles you have to write from the other side. Now more than ever we need to try to understand each other rather than being reactionary, angry or God forbid indifferent.

Rose Anderson
Dallas

You wrote that one reason Warren Buffett sold shares this year was to beat a potential increase in the capital gains tax rate. He’s now likely to be wrong about that, isn’t he?

Dale Bratton
San Francisco

Quote of the Day

“America is, as we shall point out, conservative in fundamental principles, and in much more than that, though hopefully experimentalistic in regard to much of the practical arrangements in society. But the principles conserved are liberal and some, indeed, are radical.”

— Gunnar Myrdal, “An American Dilemma,” Vol. 1 (1944)