People often talk about “the retirement age” at which you can start receiving Social Security benefits, but the current version of the Social Security Act actually allows you to start collecting benefits as soon as age 62 or as late as age 70. The longer you delay, the higher your monthly check. That raises a couple of questions—is it smart to delay taking benefits? And if it is smart, do people actually do it?
John Shoven and Sita Nataraj Slavov have an interesting new paper on all this. They show that it is smart to delay taking your benefits and that thanks to some policy changes from the late 1990s and early 2000s, delaying is smarter than ever. They also show that people who’ve retired after 2000 are more likely to delay benefits than people who retired earlier. But nevertheless, “even in the younger cohort, most individuals still claim benefits soon after turning 62” and there is “no evidence of a relationship between the probability of delay and the individual characteristics (e.g., gender, race, or health status) that affect the gains from delay.”
All of which is to say that many people are retiring when they’re 62 or 63 even though the lifetime financial benefits to delaying another year or two or three could be quite large. This dynamic builds a number of subtle inegalitarian features into the system. Basically if you have a physically arduous job that’s hard to keep doing into your 60s, you end up paying a financial penalty on top of the physical costs.