More are waiting to claim Social Security

For the typical worker and household, the most important financial decision later in life is when to start claiming Social Security benefits. In essence, claiming later leads to a higher monthly benefit check and, therefore, improved retirement security. The "wait to file" message on claiming Social Security benefits seems to be working, at least according to a recent study by the Center for Retirement Research at Boston College.

The basic age-based rules are straightforward. The earliest you can file for Social Security retirement benefits is age 62. Your "full retirement age" is when you're entitled to 100% of your benefit, at the moment 66 years and several months. The full retirement age will rise to 67 for those born in 1960 and afterwards. For every year you delay filing past your full retirement age, benefits increase by an annual 8% until age 70.

The gains from delaying are why so many experts are trying to reframe the Social Security decision. With growing appreciation for the risks associated with increased longevity (on average) and the uncertain returns with retirement savings plan — assuming you worked at a company with a 401(k) or similar plan — the baseline age for filing is 70. (There are twists to this advice for married couples, who face a more complicated set of choices. Delay still pays for at least one spouse, typically the higher-earning one. Most important: Married couples should coordinate the timing of their claiming decisions.)

The good news is that if something untoward happens, such as bad health, family needs or long-term unemployment, you can file earlier. The ability to claim as early as age 62 is a critical part of the Social Security safety net.

The Center for Retirement Research study "Pre-Covid Trends in Social Security Claiming" shows a dramatic decline in claiming at age 62 for both men and women in recent decades ending in 2019. There has been an impressive increase in those waiting until their full retirement age or later. For example, for cohorts turning 62 in 1985 and in 2015, claiming at age 62 declined by 27% for women and 21% for men.

The financial return on waiting to take Social Security is a major factor behind the growing embrace of work well into the traditional retirement years. A part-time income can make it practical to delay. Another factor is a flawed retirement system that is urgently in need of reform. Too few people have a retirement savings plan at work and, for those who do, many haven't set aside enough for a comfortable retirement. In the meantime, waiting to file is one of the better strategies that older individuals and couples can use to boost their financial security.

Chris Farrell is senior economics contributor, "Marketplace," and Minnesota Public Radio