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Many Americans Are Mishandling Their Social Security. Are You One of Them?


The biggest obstacle to maximizing your Social Security benefits isn’t your life expectancy, your health or how long you work – it’s your brain. 

That’s the conclusion of a new study published by the National Bureau of Economic Research. Researchers found that your fear of loss and personal sense of ownership of your benefits are two of the biggest predictors of how and when you’ll claim Social Security. 

A financial advisor can help you determine when to claim Social Security. Find a fiduciary advisor today.

“The stronger one’s sense of psychological ownership of one’s Social Security benefits, the sooner one intends to claim,” the researchers, Suzanne Shu and John W. Payne, wrote. “The more loss averse one is, the earlier he or she intends to claim.”

A man thinks about when the right time is to claim his Social Security benefits.

Most People Claim Social Security Too Early

The research follows a NBER study from 2022 that found almost all American workers between ages 45 and 62 should delay Social Security until after age 65, increasing their eventual payouts. While more than 90% of these workers could maximize their benefits by waiting until age 70, only about 10% take that approach. This ends up costing them over $182,000 in additional lifetime discretionary spending, the 2022 research concluded.

Role of Psychology in Social Security Planning

But pointing out this statistical reality doesn’t encourage people to delay their benefits, according to the new research from Suzanne Shu and John W. Payne.

When participants in the recent study were presented with a table showing how their benefits increase the longer they’re delayed, those with a higher sense of loss aversion instead focused on the amount of money they would lose if they died before claiming their benefits.

In other words, the greater your FOMO – fear of missing out – the more likely you are to grab your Social Security cash as soon as possible, potentially costing you in the end.

The other factor indicating that individuals would claim their benefits early was the degree to which they felt a sense of psychological ownership of those benefits. Psychological ownership refers to the sense that something is yours even if it’s an abstract concept or something in the future. While Social Security benefits are simply the promise of eventual payments, people who felt they already “owned” the money were likely to claim their benefits at an earlier age, the study found.

Individual psychological traits play a significant role in shaping expectations about the best approach for collecting benefits, regardless of what the figures and data suggest. Perhaps it’s another argument for the age-old financial advice of taking emotion out of financial planning. In the words of Warren Buffet, “If you cannot control your emotions, you cannot control your money.”

Bottom Line

A lot goes into your decision to claim Social Security, including your health, life expectancy and income needs. But new research published by the National Bureau of Economic Research shows how your own psychology can play a significant role in your decision to claim Social Security early. Being cognizant of different psychological factors, especially aversion to loss and the sense that your benefits already belong to you, can help you make a more informed decision about when to claim Social Security.

Social Security Tips

  • A financial advisor can help you project your potential retirement income and maximize your Social Security benefits. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • As your plan for retirement, use SmartAsset’s Social Security calculator to estimate how much your benefits will be worth based on the age at which you claim them. This can help you make a more informed decision, and potentially, lead to more income in retirement.
  • Get retirement planning and investing tips Tuesday through Friday with the SmartMoney Minute newsletter. It’s 100% free and you can unsubscribe at any time. Sign up today.

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