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Maximizing Social Security Not in the Cards for Many

Practice Management

In what is described as leaving money on the table, a new survey finds that few near-retired Americans are planning to wait until the age they become eligible to claim maximum Social Security benefits. 

According to Schroders’ 2021 U.S. Retirement Survey, just 10% of non-retired Americans ages 45 and older are planning to wait until age 70—the age at which an individual reaches their maximum monthly benefit—to begin taking their Social Security benefits.  

Almost a third (30%) plan to begin taking Social Security between the ages of 62-65 (before reaching full benefit age), while 14% plan to file between ages 66-69. Nearly half (46%) of respondents say they are unsure when they will claim Social Security. This trend includes non-retired respondents near or at retirement age—among those ages 60-67, just 13% said they planned to wait to age 70 to take Social Security benefits and 28% were still unsure of when they planned to claim benefits. In addition, only 5% of retirees surveyed said they waited until they were 70 years old to take their Social Security benefits. 

The decision to pass up larger monthly payments appears to be a deliberate one. According to the findings, 74% of non-retired respondents overall—and 84% of non-retired between ages 60-67—understand that the longer they wait to take Social Security, the more they will receive. 

“Social Security is the primary source of income for the majority of Americans we surveyed, which is why we were surprised to see so many deciding not to wait until 70 for larger monthly payments; or worse, sacrificing their full benefits by tapping into them early,” says Joel Schiffman, Head of Intermediary Distribution, North America, Schroders.

Schiffman notes it might come down to being able to afford to wait. “And that’s a function of how much they have saved in order to generate sufficient income in retirement. Waiting a few extra years before claiming your benefits can provide a much-needed cushion for future expenses,” he emphasizes. 

Sources of Income

For 52% of non-retired Americans and 58% of retirees, Social Security will be, or is, their primary source of income in retirement—but it won’t be enough to live on, according to 64% of those not retired and 62% of retirees. Respondents did report that additional sources of income include:

  • Cash savings (58%)
  • Investment income (48%)
  • Pension plan (40%)
  • Annuities (19%)
  • Rental income (12%)

Meanwhile, 74% of respondents expressed concerns that they don’t know how to best generate income and/or draw down their assets in retirement, and a similar amount of non-retired respondents said they wish they were more knowledgeable about Social Security. 

What’s more, according to retirees surveyed, 50% report that they do not have any strategies to generate income in retirement; instead, they said: “I just take money when I need it.” 

Regarding other ways retirees are generating income:

  • 28% said they have systematic withdrawals from a DC plan or IRA;
  • 19% have dividend-producing stocks or mutual funds;
  • 11% have CDs;
  • 9% have individual bonds or bond mutual funds; and
  • 9% have managed payout funds (equal and predictable monthly payments).

“It’s understandable that younger workers might be unsure about when they will take their Social Security benefits,” notes Schiffman, who adds that it suggests a lack of planning for people near or at retirement age to still be unsure. “By that age, investors should have a strategy in place to generate retirement income. Hopefully, those who are still unsure will try to make it to 70 to enjoy the larger benefit or at least get to the age of full benefits,” he says.  

Schroders’ survey was conducted by 8 Acre Perspective nationwide among 1,000 U.S. consumers ages 45 to 75 from Jan. 20–27, 2021. The survey included 230 working respondents with employer-provided DC plans.