For a job interview, it’s good to be early. When it comes to claiming Social Security, not so much.
Claiming Social Security before one’s full retirement age meaningfully and permanently reduces the benefit, while waiting until age 70 has the opposite effect, boosting monthly checks by more than 70% compared with claiming at 62. Despite the attractive math, many late-career workers say they want to claim as early as they can, and the reason why has less to do with needing the cash flow and more to do with worrying about the program’s weak financial footing. Simply put, people feel like they need to get their hands on the money while it’s still there.
That’s the key finding of a new survey from the National Association of Registered Social Security Analysts among its members. Respondents said nearly three in four clients want to claim early out of fear of future benefit changes or reductions, based at least in part on the faulty assumption that benefits already in payment will somehow be “grandfathered in” and protected from potential cuts. That’s just not true, according to NARSSA president Martha Shedden, and it’s critical for advisors and other financial service providers to cut through the noise.
Fear Factor
“Registered Social Security analysts work very closely with the public on their claiming decisions, so they’re in a good position to identify worrying trends like this,” Shedden told Retirement Upside. “These results show how strongly fear and confusion are influencing one of the most important retirement decisions people will ever make.”
Other findings underscore the issue:
- About six in 10 clients doubt Congress will fix the federal entitlement program before insolvency in 2032 or 2033.
- The same proportion reported feeling overwhelmed by conflicting advice about claiming, while 45% want a simple answer on the best age to claim.
“That also worries me, because this is not a simple decision, and the presence of conflicting advice clearly doesn’t help,” Shedden said. “Americans aren’t necessarily claiming Social Security early because it is the best financial decision for them. They’re claiming based on misunderstandings and uncertainty about the program’s future.”
The Advisor Angle. While its members were initially tax professionals and financial advisors, the ranks of the NARSSA have grown far more diverse over the past decade, now including insurance agents, mortgage agents, senior care facility managers, attorneys and more. So, if financial advisors aren’t talking with clients about these Social Security topics, someone else probably is.
“The survey is yet another piece of evidence that people need guidance about retirement income planning in general,” Shedden said. “They often don’t know how they can best use the funds they have to fund their retirement. Social Security is the foundation for many people, but it’s only one piece of the puzzle.”
