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GAO Report Reveals Why People Claim Social Security Benefits Early

Why would people choose to claim Social Security retirement benefits at the earliest possible age of 62, rather than waiting until their full retirement age (66 to 67 for anyone born in 1943 or later), when doing so would reduce their monthly benefit by as much as 30%? 

There are many reasons, according to a recent General Accounting Office report titled, "Challenges for Those Claiming Social Security Benefits Early and New Health Coverage Options," including work-related and demographic factors.

The blue-collar blues

The study compared workers in a variety of positions and industries--farming, construction, sales, professional, and managerial, among others--and found that blue-collar workers were much more likely to claim early retirement benefits than others. This may be due to the fact that blue-collar work is typically more physically demanding, and therefore progressively harder as people age.

For example, 54% of men in farming jobs claimed benefits at age 62, compared with just 26% of men in managerial positions. Eight out of 10 male farmers claimed their benefits before reaching full retirement age, compared with a little more than half of all managers, both male and female.*

Employment status impact

A person's employment status also revealed significant differences in the timing of claims. Full-time workers were approximately 30% less likely to claim early. By contrast--and perhaps not surprisingly--those who said they were retired or unemployed were more likely to tap their Social Security early.

Interestingly, those with long work histories--at least 35 years of earnings--were 38% more likely to claim their benefits early than were those with shorter work spans.

Other factors

The study revealed several other factors that contributed to early claims of benefits:

  • Education: Those with less than a college degree were 23% more likely to claim early than were those with at least a college education.
  • Marital status: Widowed individuals were generally more likely to claim their benefits before reaching full retirement age compared with married, divorced/separated, or partnered couples.
  • Life expectancy: Those who thought they had a strong chance of living past age 75 were significantly more likely to delay their benefits when compared to those with lower longevity expectations.

Financial benefits of waiting

According to the GAO's research, delaying Social Security resulted in a stronger financial position in retirement. Households with an individual who delayed benefits until at least full retirement age received a median income that was 45% higher than households who took benefits early. Similarly, total wealth in households where someone delayed benefits until at least full retirement age was 25% higher than in households with someone who claimed early.

*The study did not report findings for female farmers.

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Kenneth S. Rakes has 25 years of experience in public accounting and is a graduate of John Carroll University. Ken provides tax planning and preparation services for individuals, partnerships, corporations, estates, and trusts. Ken is a Personal Financial Specialist (PFS) providing retirement, estate, investment, insurance, and education planning for individual clients with an emphasis on the tax implications of planning decisions. Ken's other areas of expertise include: Manufacturing, Wholesale, Retail and Service Industries, Non-Profit Organizations and Sub-Chapter "S" Corporations.