Does it pay to delay Social Security Benefits?

New research from John B. Shoven and Sita Nataraj Slavov says, for many people, the answer is yes. The standard response is that the benefits you receive over your lifetime are roughly the same whether you claim at age 62, age 70 or anytime in between. And this may be true on average.

But Shoven and Slavov investigate which types of retirees would do better or worse by claiming. What they find, however, is that many of those who would fare better by delaying benefits fail to do so. Here’s the summary of their paper published by the National Bureau of Economic Research:

“Social Security benefits may be commenced at any time between age 62 and age 70. As individuals who claim later can, on average, expect to receive benefits for a shorter period, an actuarial adjustment is made to the monthly benefit amount to reflect the age at which benefits are claimed. We investigate the actuarial fairness of this adjustment.”

“Our simulations suggest that delaying is actuarially advantageous for a large subset of people, particularly for real interest rates of 3.5 percent or below. The gains from delaying are greater at lower interest rates, for married couples relative to singles, for single women relative to single men, and for two-earner couples relative to one-earner couples. In a two-earner couple, the gains from deferring the primary earner’s benefit are greater than the gains from deferring the secondary earner’s benefit.”

“We then use panel data from the Health and Retirement Study to investigate whether individuals’ actual claiming behavior appears to be influenced by the degree of actuarial advantage to delaying. We find no evidence of a consistent relationship between claiming behavior and factors that influence the actuarial advantage of delay, including gender and marital status, interest rates, subjective discount rates, or subjective assessments of life expectancy.”