Collecting Social Security Early Costs Workers $225,944

By the Numbers: A Striking Figure in Personal Finance News Today

Social security benefits falling

If you collect Social Security benefits before age 70, you could live to regret it—a typical middle-aged worker will get $225,944 less in benefits over their lifetime by collecting too early.

That’s according to a working paper published this month by the National Bureau of Economic Research. Researchers at the Federal Reserve Bank of Atlanta and Boston University used financial analysis software to determine the ideal age for people to begin collecting benefits. The researchers concluded that almost everyone should wait until age 65 or later to begin collecting, and that 90.1% should wait until Age 70. Astonishingly, only 10.2% do. 

The upshot is that among workers aged 45-62, optimizing retirement time could mean collecting a median $225,944 more over their lifetimes, an increase of 20.3%. 

Deciding when to begin collecting Social Security benefits involves a lot of tradeoffs. The younger you begin collecting, the less money you’ll get, with your benefit amount changing on a sliding scale. For instance, if you were born in 1960 or later and you begin collecting as early as possible—at age 62—your benefits will be 30% lower, and your spouse’s will be reduced by 35% compared to if you had waited to age 70. 

Of course, waiting to collect will reduce your cash flow for several years. And many people can’t afford to wait. But if you can, it’s probably worth it. The longer you live, the more likely you’ll benefit by having waited to collect, the researchers found.

Statistically, people benefited greatly from waiting to 70 whether their incomes were low or high.

“Whether rich, middle-class, or poor, what’s required is simply patience—waiting to apply for the right benefits at the right time,” the researchers concluded.

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  1. National Bureau of Economic Research. "How Much Lifetime Social Security Benefits Are Americans Leaving On The Table?"

  2. Social Security. "Starting Your Benefits Early."

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