For many retirees, Social Security serves as one of their most important sources of funds.
Since these benefits will be essential to your financial security in your later years, you'll want to make the best possible choice about when to start receiving them, as this decision determines the amount of money they'll actually provide.
Unfortunately, research shows many retirees realize too late that they need to be strategic about when they claim their benefits.
Far too many retirees have Social Security regrets
According to a study conducted by the Michigan Retirement and Disability Research Center of the University of Michigan, 22% of current retirees regret claiming Social Security benefits when they did. For the vast majority of those with regrets, the problem is starting them too soon. In fact, 20% of retirees wish they'd claimed their benefits later.
It's not surprising so many seniors are sorry they claimed Social Security at a suboptimal time, as millions of people don't understand how these benefits work and thus can't make the best choices. In fact, close to half of all millennials and Gen Xers and more than half of all baby boomers incorrectly believe that if they claim a reduced Social Security benefit early, it will adjust upward when they reach full retirement age. That is simply not true.
Many retirees also don't realize how much of their Social Security checks will end up going to healthcare expenditures, so may come to wish they hadn't shrunk their benefits as medical bills pile up later in life that they struggle to afford.
Sadly, more seniors in the future may be faced with regrets due to the COVID-19 recession. Periods of economic downturn generally lead to an increase in the number of Americans who claim their benefits early. With unemployment especially high among seniors during the 2020 recession, this effect may be even more pronounced this time around.
How can you be sure you'll make the best choice?
Unfortunately, there's no way to be 100% certain you'll be happy with your decision on when to claim Social Security, because you can't predict the future.
While the majority of seniors end up financially better off by delaying their claim for benefits, those who pass away young may not break even for years of missed benefits if they wait. And some retirees are forced to claim benefits early because they cannot continue working and need the money, while others simply prefer to get their checks sooner even if they are smaller ones.
Ultimately, the best way to avoid regrets is to make sure you understand the trade-offs before you file for benefits. You're going to have to choose between getting checks starting at a younger age but having smaller monthly checks for the rest of your life, or going years without Social Security income in order to get larger monthly payments later. And your decision will also affect your spouse, if you have one, since you could shrink survivor benefits if you claim early.
Since it can be hard to undo a claim for benefits once you've made one, consider your options carefully. When you make a fully informed choice, you're much more likely to be happy with the decision you've made.