Social Security recipients are missing out on $182,000 by claiming too early, study finds

Social Security recipients are missing out on nearly $200,000 by claiming benefits too early, according to a new study.

The study, from Atlanta Fed director of research David Altig, the noted Boston University economist Laurence Kotlikoff and Victor Yifan Ye, also of Boston University, says that more than 90% of American workers should wait until the age of 70 to collect. Yet only 10% do so.

See MarketWatch’s Social Security page for more coverage.

Individuals are eligible for Social Security benefits at age 62, but get up to 30% less.

They use an analyzer tool from Kotlikoff’s Economic Security Planning and inputs from the Federal Reserve’s survey of consumer finances to come up with their results. That tool incorporates all major federal and state tax and transfer programs.

Their finding is that the median boost to households is $182,370, or 10.2%. And the reduction in income by waiting for the benefits is, at median, $2,714.

“Young as well as older workers can gain from postponing Social Security benefit collection. Such delay does, however, come at a higher cost – far more workers becoming cash-flow constrained. On the other hand, the typical temporary living standard reduction is small,” they say.

They also studied the financial impact of optimizing benefits on the US government — the present value of lifetime benefits on all current adult Americans would rise by 6%, or $3.4 trillion. If future generations also optimize, another $3 trillion cost would be incurred.

The study was circulated by the National Bureau of Economic Research.

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