Social Security Timing Decision Influences by Psychological Factors: Study

Phoenix, Arizona – As retirement approaches, one of the biggest financial decisions for most Americans is when to start taking Social Security. The choice is between claiming the money as early as age 62, delaying until age 70, or somewhere in between. There are trade-offs with each decision, as claiming earlier means smaller monthly payments, while waiting results in larger payments but with a delay.

A new study conducted by researchers at Cornell University and Duke University delves into the psychological and emotional factors that can impact this decision. The study, highlighted in a recent commentary by the Center for Retirement Research at Boston College, emphasizes that the size of monthly Social Security checks is crucial, especially for the 40% of Americans who rely solely on Social Security for retirement income.

Experts generally advise waiting to start taking Social Security, despite this advice, only a small percentage of Americans actually wait until 70 to claim. Many people claim at ages 62-64, which goes against the prevailing advice. The study suggests that one way to encourage delaying claiming is to first spend down other retirement assets such as 401(k) balances.

The study explores the psychological and emotional reasons that influence the decision to start taking benefits, focusing on factors such as a sense of ownership of personal benefits, loss aversion, uncertainty about life expectancy, and patience. It found that those with a higher sense of ownership tend to claim earlier, as do those with higher loss aversion, while people with longer life expectations and greater patience are more willing to wait.

Interestingly, the study also found that when presented with information on potential lifetime benefits, people were more likely to want to claim earlier, possibly reflecting loss aversion. This suggests that people may be more concerned about not collecting all potential Social Security payments over time.