The most popular age at which to start claiming Social Security benefits is the minimum of 62, according to the Bipartisan Policy Center, even though most financial professionals will encourage their clients to hold off on claiming as long as they can, barring any exigent circumstances. A paper from the Center for Retirement Research at Boston College quantifies the impact that raising the age has on retirement behaviors.
Related: Could the 401k Be a Social Security ‘Bridge’ to More Income?
Increasing the full retirement age for Social Security decreased the early retirement rate by about 30% for men and 20% for women, according to the paper published in January. The paper, “The Effect of Early Claiming Benefit Reduction on Retirement Rates,” was written by Damir Cosic, senior research associate, and C. Eugene Steuerle, fellow and the Richard B. Fisher chair, at the Urban Institute. They used data from the Current Population Survey to compare the effect of FRA reforms on early retirement rates.
“An individual’s decision to retire not only determines the future stream of income, but, because some retirement decisions are irreversible (e.g., few workers can return to their job after they leave), it also limits the universe of options available in the future,” the authors write.
They add that one of the challenges in deciding when to begin claiming Social Security benefits is the disparity in research-backed advice, with some experts finding early claims have a negative impact, some finding no impact, and others finding a positive impact.
Related: Americans Need to Change Their Retirement Trajectory
When the full retirement age was raised in 1983, the retirement rate at age 62 fell 5.1 percentage points for men to 9.6%, the authors found. For women, the retirement rate at 62 fell one point to 8.4% and increased by the same amount at ages 58, 59, 61 and 64.
“In addition to reducing Social Security outlays,” Cosic and Steuerle write, “increasing the FRA has the potential to increase labor force participation among older workers, which, in turn, could help grow the economy and increase tax revenues.”
Related:
- How a Financial Transaction Tax Would Hamstring 401k Savers
- 4 Big Trends for Retirement Plan Advisors in 2021
- Here’s How Much the Average Retiree Has Now (Hint: It’s Not Enough)