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More Americans are making smarter Social Security choices

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Delaying the start of Social Security benefits is a smart strategy for most recipients, and one whose advantages are well documented. A delay strategy increases the total amount of money expected to be paid over most single workers' lifetime or for a couple's primary wage earner. An additional boost for married couples is that a delay strategy can increase the survivor's benefit paid upon the primary worker's death.

In spite of these substantial advantages, for many years the average age at which workers started their Social Security benefits was stuck at barely above 62, the earliest possible age -- with the lowest possible benefit. Starting Social Security benefits at age 62 versus waiting until the "full retirement age" (currently 66) reduces the annual income by 25 percent, for life. Delaying benefits beyond 66 increases annual income even more -- by 8 percent for each year benefits are delayed, but only until age 70.

Are older workers finally getting the message about the advantages of a delay strategy?

The answer might be "yes," according to a recent report from the Stanford Center on Longevity. SCL's Sightlines report includes comprehensive measures of the actions that Americans of all ages are taking that help boost their chances of living long and living well. These steps are organized into three domains: financial security, healthy living and social engagement. The report includes an analysis of the ages workers start their Social Security benefits.

It found that in 2012, 26 percent of workers who attained the full retirement age of 66 hadn't yet filed for Social Security. That's double the comparable percentage of 66-year-old workers in 2000 who hadn't yet started collecting and is one piece of evidence showing that more workers are delaying their Social Security benefits.

This data is consistent with an earlier report by the Boston College Center for Retirement Research, which showed that in 1996, more than half (56 percent) of men who had attained 62 had already filed for Social Security, a percentage that dropped to 35.6 percent by 2013. The report showed similar results for women.

While it's encouraging to think that more Americans are getting the message about the advantages of delaying Social Security, it's possible that an improving economy is also a contributing factor. Many older workers who lost their jobs during the Great Recession felt they had no choice but to retire and start their Social Security benefits.

In addition, the Sightlines report also shows that many people aren't delaying for very long. Almost three-fourths of older workers had already started collecting by 66 -- the full retirement age. The reasons people give for starting their benefits early are varied. Many can't find work and need the money to make ends meet. Others are tired of working and can't wait to retire.

However, a smarter alternative might be to find different work that's enjoyable, possibly part-time and pays just enough to replace the Social Security benefits that are being delayed.

Some people think they can start Social Security benefits early and do better by investing the money until they really need it. That's theoretically possible. But to even have a chance of making this strategy work, you'll need to take substantial risks in the stock market. On the other hand, delaying Social Security benefits is a safe way to increase your retirement income without taking any stock market risk.

Other people start collecting Social Security benefits as soon as possible because they think benefits will be reduced in the future due to funding problems, and they want to get it while they can. But this reasoning is faulty as well: It's highly unlikely that politicians will reduce Social Security benefits for people close to retirement, given past history.

If you haven't yet started your Social Security benefits, you'd do well to carefully consider the pros and cons of different claiming strategies. For most people, Social Security represents the biggest portion of their retirement income, and it pays to make smart decisions that can improve your financial security for the rest of your life.

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