Early Social Security Filers Afraid to Lose

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Retirement experts and financial advisers maintain there is a right way and a wrong way to approach Social Security.

For most people, the right way is to view waiting until your late 60s to sign up for benefits as the route to boosting your retirement income and protecting against out-living your savings.  People who delay will have a larger Social Security check to pay the bills that come due every single month for as long as they live.

The wrong way is to make a decision based on fear – the fear of losing money if you don’t sign up soon after turning 62, the earliest age allowed under the program.  While you might feel that delaying means losing out, delay can, in fact, protect you and your spouse from a more consequential loss in the future: inadequate monthly income when you are very old.

A study on this issue used a new technique to identify which individuals possess this fear of loss.  In six different online surveys, the researchers asked some 7,000 working-age adults to choose between numerous pairs of gambles showing the probabilities of scoring a financial gain (45 percent), losing money (45 percent), or breaking even (10 percent).  In each pair, one gamble had a smaller potential dollar loss than a second gamble in which they could lose more money – but also win more.

Loss aversion was prevalent. They found that about 70 percent of adults showed some degree of loss aversion, meaning that they preferred the gamble that risked a smaller dollar loss.

Next, the researchers analyzed whether the people who were most loss averse also plan to claim their Social Security benefits at younger ages.  In all six surveys, the most loss-averse workers were significantly more likely to claim their benefits earlier.

The researchers hope their new technique and findings improve the ability to identify who is loss averse, so that experts can design better ways to help people make smart decisions about their Social Security, the bedrock of most Americans’ retirement security.

The research reported herein was performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement Research Consortium. The opinions and conclusions expressed are solely those of the author(s) and do not represent the opinions or policy of SSA or any agency of the federal government. Neither the United States Government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report. Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.   

Paul Brustowicz

I know several people who chose SS at 62 even though they did not need the income since they were very well off. I couldn’t figure out why they elected to a lower payout at 62 but having read this story about risk averse behavior, I can understand why they did what they did.
I have seen other risk aversion behavior in their choices and can confirm the research anecdotally.

Thomas Figueroa

Totally agree with whats said here. I think we must make the right decisions at the right age.

Bill S.

I took my SS at full retirement age of 66. If I waited until 70 I could have gotten $500 a month more. However, in those 4 years I would have given up $112,000. At $500 a month, it would have taken me nearly 19 years just to break even!


    The previous comment from Bill S. is the same question I had: I’m not sure it ALWAYS makes sense to postpone the withdrawal. Now…the other question I have: IF you’re married and your wife outlasts you — a common occurrence — does SHE get the ongoing Social Security pay out? Because if so, on balance, it may make it more profitable for the full family to postpone the payout, yes??? Help! ROB

      Kim Blanton

      Rob, yes!

      If a wife earns less than her husband, it usually does make sense for him to delay. If she outlasts her husband, she’ll receive the amount of his Social Security benefit in the form of a “survivor’s benefit.”

      My own mother learned this the hard way. Here’s a blog I wrote about her situation:

      But before making any decisions, I encourage readers to call Social Security at 800-772-1213 and ask questions and talk through the options.

      Thank you for reading – Kim (blog writer)

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