Why take Social Security early?

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You can claim Social Security beginning at age 62, but if you do that, your benefit will be substantially lower. Still, many people decide to claim at the earliest possible age.

Of those born in 1946 with a full retirement age of 66, about 32 percent of men and 38 percent of women claimed Social Security in the first month that they turned 62, according to a new report by the General Accountability Office, or GAO. Only 8 percent of men and 7 percent of women waited until age 67 or later to claim — despite much higher benefits. (See chart below.)

Why do so many people grab the iron ring instead of waiting for the brass? This GAO study outlines lots of easily understandable reasons.

  • People are tired of working. People who had already worked at least 35 years by the time they were between age 60 to 62 were 38 percent more likely to claim Social Security early.
  • Physically demanding jobs make working longer hard or impossible. People who held a blue-collar job at age 60 to 62 were 55 percent more likely to take retirement early.
  • Education has an impact. People who didn’t have a college degree were 23 percent more likely to claim early.

How long people expect to live impacted when they claimed Social Security, but not as directly as you might suppose because household wealth also played a role in their decisions. People with less than a 30 percent expectation of living to age 75 and with household wealth in the comfortable range — between $236,794 and $585,052 — were most likely to take Social Security early, with 78 percent claiming before full retirement age. People with less household wealth — at or below $83,638 — were most likely to delay claiming, with only 58 percent  claiming early, even though they didn’t expect to surpass age 75. If you can’t afford to quit, you don’t.

Claiming Social Security early reduces household income. Those who claimed before full retirement age earned a median household income after claiming of $49,612. Those who waited until full retirement age or later, conversely, earned a median annual household income of $71,907. That’s a huge difference even though the study also points out that people who claimed early tended to have higher income from pensions than those who delayed. Claiming early is expensive.

I found this study interesting because it seems to me — as a woman who sits behind a desk all day and likes what she does — that delaying claiming and continuing to work makes the most retirement planning sense. But obviously, not everybody sees it that way — and often for good reasons.

As you consider when to claim, avoid these six Social Security traps.