If you're thinking about claiming Social Security benefits early, then rest assured that you're in good company. According to a recent government report, age 62 remains the "most prevalent age" to do so.
Why do so many seniors defy conventional wisdom?
While the fact that many people take Social Security at age 62 might not seem notable at first, it does when you consider that the trend defies conventional wisdom.
Not only does the math seem to suggest that you should typically wait until at least turning 66, as your monthly benefits increase the longer you hold out, but virtually all of the experts on the issue say the same thing.
"By waiting until 66, monthly benefits would be 32% greater than by starting at 62 and more than 76% greater by waiting eight years until age 70," explains Buck Wargo of Complete Senior.
"With the addition of cost-of-living adjustments, that beats most investments for Social Security, which is like an annuity that is paid the rest of your life."
The question in turn is: Why do so many retirees go against this seemingly sound advice?
And the answer is: The decision to take Social Security is frequently less of an option than many experts tend to assume.
Why do people claim early: fact vs. fiction
The problem with much of the available advice on Social Security is it presupposes that prospective beneficiaries have a choice -- that they're willing and able to analyze the decision of when to apply in a cool and calculated manner.
However, new data released by the government offer compelling evidence that this belief is misguided.
In the first case, there's a strong correlation between one's type of work and when they claim benefits. "Compared to all other occupations, those who held a blue-collar job at age 60 through 62 were 55% more likely to claim early," says a recent report by the U.S. Government Accountability Office.
This follows from the fact that "61% of those who held a blue-collar job at age 60 through 62 reported their job was physically demanding and/or involved heavy lifting most or all of the time compared to 25% of those in all other occupations."
Suffice it to say, men and women in their 60s are not designed to be working in positions that are physically demanding and require frequent heavy lifting.
On top of this, data released by the Social Security Administration strongly suggest that the decision to begin receiving benefits is based on need and thus not desire, as is typically assumed by writers and analysts who urge prospective retirees to defer until at least 66.
You can infer this from the chart below, which shows the percent of American men and women who claim benefits at age 62 -- i.e., the earliest possible time.
The thing to note here is on the right-hand side of the chart.
What this shows is that the percent of people claiming benefits at age 62 increased markedly when unemployment accelerated during the financial crisis.
The percent of men applying for benefits at age 62 increased from 33.5% in 2007, the year before the recession, to 35.8% in 2009, at the lowest point of the recession. Meanwhile, the percent of women went from 36.3% to 38.9%.
The obvious takeaway is that "declines in employment tend to increase claiming at age 62 as a replacement for lost earnings." In other words, while it's nice to think most people have the luxury of choosing when to begin collecting Social Security benefits, the data seem to suggest otherwise.
The net result is that people who do fall into the camp of early claimants can rest assured that they're in good company and that they needn't regret the decision to begin receiving checks prior to "full retirement."
