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Beyond Age 62: When Delaying Social Security Makes More Sense

Beyond Age 62: When Delaying Social Security Makes More Sense

March 28, 2024

Many people claim Social Security benefits as soon as they're eligible at age 62, even though financially, it often makes more sense to wait until later. To some, this is puzzling—after all, wouldn't you want the highest possible income in your golden years?

Economists have studied this question and recommend waiting to claim Social Security. But there's more to the decision than just numbers. Recent research shows that psychology plays a significant role in deciding when to claim benefits.

Here are some of the interesting findings:

  • People feel a sense of ownership over Social Security. They've been paying into the system for years, so they see the benefits as "theirs" and are eager to start collecting them. This feeling is stronger than the fear of missing out on potentially higher benefits later.
  • The way information is presented can influence decisions. Studies show that people who are shown the total amount of benefits they'd receive under different claiming ages are more likely to choose the option with the LOWER total benefit! This goes against logic, but it highlights the power of loss aversion - people are more worried about losing something they already have than gaining something new.

So, what can you do to make the best Social Security claiming decision?

  • Talk to a financial advisor. We can help you understand your options and consider factors like your life expectancy and financial goals.
  • Focus on the long term. Don't just consider the immediate income you'd get by claiming early. Consider how much better off you could be financially if you wait.
  • Be aware of your own biases. We all have them! Knowing that you might be more likely to decide based on loss aversion can help you weigh the options more carefully.

Understanding the psychology behind claiming Social Security can help you make a more informed decision that's right for you. Retirement and Social Security planning go hand in hand, and you need knowledgeable advisors to guide you. 

If you are still questioning whether you need a financial advisor, this blog is an excellent example of why one would be beneficial. Let the Dixon Financial Group Team help you. We are well-versed in the ins and outs of Social Security, and we want you to make informed decisions, not emotional ones.

David S. Dixon, CFP®

Jacob S. Bierstedt, CFP®, ChFC

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