More people are delaying Social Security benefits

It looks like people are now paying attention to the plethora of advice retirement analysts and writers -- including me -- have been offering about delaying Social Security benefits as a means of improving retirement security. The Social Security Administration's Annual Statistical Supplement for 2013 provides evidence of a slow but steady increase since 2004-2005 in the age at which Americans start taking Social Security benefits, reversing a prior trend of claiming payments at earlier ages.

Age 62 is the earliest possible age to start collecting Social Security benefits, but it results in the lowest possible monthly income. The first chart below shows that in 2000, 41.6 percent of new Social Security awards for men were for 62-year-olds. This percentage climbed to 50.3 percent by 2004, but dropped to 37.2 percent by 2012.

Similarly, in 2000, 52.2 percent of new Social Security awards for women were for 62-year-olds. This percentage climbed to 55 percent by 2004, but dropped to 42.4 percent by 2012.

Percentage of people claiming Social Security at age 62 decreasing
The claiming age for women somewhat reflects that men tend to marry women who are younger than themselves, and often husbands and wives retire and start collecting Social Security at the same time. Another confounding factor is that when the husband has been the primary breadwinner, some planners advocate starting the Social Security benefit for wives early while delaying it for husbands.

Your benefit is not reduced if you retire at your Full Retirement Age (FRA), which is 66 for people retiring today. The next chart shows that in 2000, 31.7 percent of new awards for men were for those who waited until their FRA to start benefits. This percentage dropped to 22.4 percent by 2005, but since has increased to 31.5 percent by 2012.

Similarly, in 2000, 23.6 percent of new awards for women were for those who had reached their FRA. This percentage dropped to 17.1 percent by 2005, but since has increased to 25.2 percent by 2012.

ss-start-age-chart-2.jpg
Note that the FRA was age 65 for workers attaining that age before 2003, and it increased to 66 for workers attaining age 65 between 2003 and 2007. For workers turning 65 in 2008 and after, their FRA is age 66.

Your Social Security retirement income increases for every month you delay starting benefits after your FRA -- until you reach age 70, beyond which there are no further increases. The final chart shows that in 2000, 9.9 percent of new awards for men were for workers between their FRA and age 69. This percentage fell to 2.7 percent by 2005, but increased to 5.2 percent by 2012.

Similarly, in 2000, 6.5 percent of new awards for women were for workers between their FRA and age 69. This percentage fell to 2.7 percent by 2005, but increased to 5.2 percent by 2012.

ss-start-age-chart-3.jpg
Starting Social Security benefits at age 70 results in the maximum retirement benefit. From 2000 to 2012, the percentage of people waiting to age 70 or later to claim their benefits has stayed somewhat steady at low levels, fluctuating around 1 percent for men and 2 percent for women.

The reasons for this slow but steady trend to delay Social Security benefits aren't clear. It could be that more people are hearing and heeding the messages about the advantages of doing so. It could also be that more workers are delaying retirement due to an improving economy -- the percentage of workers claiming Social Security early tends to rise when the economy is poor and fall when the economy improves.

Also, more people are reporting recently that they want to delay retirement, either due to the desire to continue working or because some people are making a realistic assessment that their retirement resources aren't adequate to support their lifestyle.

There are significant financial advantages to delaying the start of your Social Security benefits. This trend is encouraging to people like me who worry about Americans' retirement security. I hope it continues.

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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.

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