How to Get Americans to Take Social Security Later Rather than Sooner -- and Why

A new study finds that you can persuade retirees to delay taking Social Security benefits simply by changing the way you frame the decision.

More than half of U.S. retirees rely on Social Security retirement benefits for the bulk of their income, according to the Social Security Administration. As a result, choosing when to claim those benefits is one of the most important financial decisions a retiree can make. Americans can request to begin their Social Security benefits as early as age 62, but for every month they delay up to age 70, the amount of the benefit increases.

Once someone claims benefits, though, they are locked in, except for cost-of-living adjustments which reflect inflation. "By retiring at 62, I'm deciding what income I'll have for rest of my life," said Eric Johnson, marketing professor at Columbia University and co-author of the study. "For most Americans, this will change not only how much wealth they have but their health, because these funds will be used for home health care and things like that."

A Little Patience Goes a Long Way

Thus, for the 31 million Americans projected to retire within the decade, a little patience would help their bottom line. For example, someone who qualifies for $12,000 in annual benefits at age 62 who chooses to wait until they are 67 years old would receive $17,280 annually, according to a MetLife analysis. At age 70, they would get $21,120.

Johnson and three colleagues interviewed more than 1,300 people, all of whom are more than 45 years old and earn $35,000 to $49,000. (People in this earnings bracket are more likely to rely on Social Security as their primary source of income during retirement.) The researchers asked people to list all of their thoughts in favor of taking benefits early, and then, afterward, to list all of their thoughts in favor of collecting later. Then researchers posed the same question to another group, but in reverse order: first asking their thoughts in favor of collecting later, and then sooner.

When the questions were framed the second way, almost twice as many people -- 25% of those eligible for benefits, compared to 15% of those asked to consider the future last -- said they would wait until they were 70 years old to retire. The key is to "frame the future first," Johnson says. "If you can get people to think about the future, you can cut impatience by a factor of two, and that should change behavior."

Moreover, participants who were asked to consider the upside of waiting first chose to delay the age they would claim benefits by an average of nine months, compared to those who were asked to think first about the advantages of taking benefits sooner. "That's a pretty big chunk simply for asking people same question in a different order," Johnson says. "You can change the way people construct their preferences with a relatively neutral intervention."

Why Most Seniors Should Wait

While some seniors must claim benefits early because they are in poor health, lost their job or don't have any cushion to fall back on, the number of early retirees who cite those reasons doesn't account for the total, the researchers note.

About half of those eligible for Social Security benefits -- 52% of men and 56% of women -- claimed benefits at 62 years old, according to the administration's 2007 Annual Statistical Supplement.

Why does it make sense to wait? In two words: life expectancy. Obviously if someone takes benefits at 62 and dies at 67, they made the best choice. But that's not likely, at least from an actuarial standpoint.

A 62-year-old male today has a 72% chance of living past age 79, and a female has an 82% chance, according to the Society of Actuaries Annuity 2000 Mortality Tables. "At age 94, there is still a 24% probability that a woman will still be alive," Johnson says. "She's not likely to go out and work if she's running out of money."

Going back to the earlier example from the MetLife analysis, someone who qualifies for $12,000 when they are 62 years old would earn an extra $5,280 per year by waiting five more years. It would take 12 years to make up the payments he or she wouldn't receive by retiring early. So, for most seniors, it's worth it to consider the future first.