The overwhelming majority of Americans file for Social Security retirement benefits at or before their full retirement age. In fact, the latest data shows that 90% of Americans start collecting benefits at age 66 or earlier, while just 2% of men and 4% of women wait until age 70. Since a retiree's benefit at age 70 is a whopping 76% greater than it would be if they claimed at age 62 (not including eight years' worth of cost-of-living increases), the obvious question is: Why don't more people wait?

The financial benefit of late retirement

Americans who have earned enough Social Security credits to qualify for retirement benefits can choose to start collecting Social Security as early as age 62 or as late as age 70. Well, technically workers can wait even longer, but there's no reason for doing so. Until age 70, the longer they wait, the biggerer their benefits will be.

For those workers reaching retirement age now, full retirement age for Social Security is 66 years old. For workers born after 1954, full retirement age will gradually rise until it reaches 67 for those born in 1960 or later. It's at this age that workers are eligible for their full Social Security benefit, or primary insurance amount (PIA).

Claiming benefits early results in a reduction from the primary insurance amount by 6-2/3% per year for up to three years before normal retirement age, and by 5% beyond three years. On the other hand, delaying retirement past normal retirement age results in an increase of 8% per year.

To illustrate this, let's consider the case of a worker who is entitled to a PIA of $1,500 at a full retirement age of 66.

Age When Starting benefits

Change From PIA

Monthly Benefit




























So this individual's benefit, if they waited until age 70, would be $855 higher than it would be if they filed at age 62.

Retirement isn't always voluntary

The obvious answer to the question of "Why don't more people wait until 70?" is that the vast majority of Americans stop working before 70 and need the money. And this isn't necessarily by choice. Although 22% of workers plan to work until age 70 or later, only 9% actually do.

According to a recent survey from the Employee Benefit Research Insititute, 78% of American workers stop working at age 65 or earlier, but not always because they're financially comfortable enough to do so. In fact, nearly half (49%) of retirees left the workforce earlier than they had planned. Among this group, the following reasons were given for retiring early (note that respondents could choose more than one answer):

  • 61% retired early for health reasons.
  • 18% were downsized or laid off.
  • 18% retired to care for a spouse or other family member.
  • 7% said the required skills for their job changed.
  • 22% cited other work-related reasons.

According to a separate report from Merrill Lynch and Age Wave, only 41% of early retirees cited a positive reason for retiring, such as "sufficient financial resources" or "wanted to spend time with family." The rest gave answers similar to those listed.

An unplanned early retirement can be rather costly. Experts say that most people need about 80% of their pre-retirement salary to maintain their standard of living in retirement. Well, if someone plans to work until 67 but ends up retiring at 62, that translates to five years of retirement income he or she wasn't planning on coming up with. If this individual was earning $75,000 per year, the 80% rule says he or she will need $300,000 to cover those five years' worth of living expenses. So it's no wonder that people in situations like this can't wait until 70 to start Social Security.

It's all the same -- in theory
There's another important point that could explain why many retirees don't feel the need to wait, even if they plan to work until 70 or beyond. Theoretically, it doesn't matter when you file for Social Security benefits -- the total you receive throughout your retirement should be the same.

This is the entire rationale for reducing benefits for early retirees and increasing them for those who wait. According to the Social Security Administration's life expectancy tables, the average 62-year-old is expected to live to about 83 (82 for men, about 84.5 for women), while a 70-year-old is expected to live until about 85 (84 for men, 86 for women).

What this means is that if you multiply a retiree's benefit at 62 by 21 years and the benefit if that person were to wait until 70 by 15 years, you'll end up with about the same amount of lifetime benefits when factoring in cost-of-living adjustments. Again, this is based on averages – many 70-year-old retirees end up living for another 25 years, while many 62-year-olds die at 65. There's really no way to know what age you need to claim to get the most out of Social Security.

The bottom line is that if you're in excellent health and have good reason to believe you'll make it beyond age 80, or if you simply want a higher standard of living in the years you spend retired, you may want to seriously consider delaying Social Security beyond your full retirement age. However, the science behind Social Security says you'll get about the same total amount of money from the system regardless of when you file for benefits, so if you need the money before you're 70, there's absolutely nothing wrong with filing years before then.