Waiting until age 70 to claim Social Security would boost the typical worker’s median discretionary spending by $182,370 over a lifetime, according to one study
It’s no secret that retirees are often better off waiting to collect Social Security benefits. But exactly how much money are people leaving on the table by taking benefits early?, funded by the Federal Reserve Bank of Atlanta, finds that retirees often give up tens of thousands or even hundreds of thousands of dollars by taking Social Security benefits too early.
To arrive at their findings, the researchers used three large data sets: the Federal Reserve’s 2019 Survey of Consumer Finances, the U.S. Census Bureau’s annual American Community Survey between 2000 and 2020, and the Current Population Survey conducted by the Bureau of Census for the Bureau of Labor Statistics. The first data set was used to observe the finances of 6,000 households. The second two data sets were used to model different retirement dates.
One big problem is that it can mean taking a financial hit in the short term. The authors found that 47% of the households in the study would have to reduce their spending in the near term if they postponed collecting Social Security. One solution, according to Prof. Kotlikoff, might be for the government to consider allowing people to collect a portion of their Social Security benefits early and another portion later on, so that they could receive the higher payout down the road.
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