A Plan to Discourage Early Social Security Claims
Social Security

A Plan to Discourage Early Social Security Claims


Concerned about the number of Americans who are claiming Social Security in their early 60s, a bipartisan group of senators is calling for changes in how the federal government explains the options workers have as they weigh their retirement dates.

The lawmakers – including Sens. Bill Cassidy (R-LA), Chris Coons (D-DE), Susan Collins (R-ME) and Tim Kaine (D-VA) – note that while workers can choose to retire once they turn 62, doing so results in lower monthly payments and a smaller lifetime payout on average.

“When to claim Social Security benefits is a critical decision for older Americans planning their retirement,” the senators wrote in a letter to the Social Security Administration. “Most people, however, do not claim benefits at the age that would maximize their income in retirement, usually because they claim too early.”

The Social Security Administration says that as of 2019, nearly 35% of men and 40% of women claimed their benefits at 62. According to a study by the investment firm United Income cited by the senators, millions of American retirees claim Social Security “at a financially sub-optimal time,” resulting in a collective loss of $3.4 trillion, or more than $100,000 per household.

While there are many reasons workers may opt to retire at the earliest age possible – including joblessness, financial setbacks, looming poverty and deteriorating health – the senators say it is important that potential retirees understand the long-term costs and benefits associated with their decisions.

New labels: The lawmakers propose to change the way Social Security describes the cutoffs for receiving different levels of benefits. Currently, those who turn 62 are said to have reached “early eligibility age,” which allows retirees to receive benefits but at a permanently lower rate (the reductions are described here); those who reach 66 or 67, depending on birth year, are at “full retirement age,” with standard benefits; while those who wait until age 70 have earned “delayed retirement credits” for each month they wait, which provides the maximum payout (described here).

In an effort to clarify the various benefit levels associated with different retirement ages, the lawmakers want to describe the cutoffs as “minimum benefit age” for those who choose to retire early; “standard benefit age” for those who wait until the basic retirement age; and “maximum benefit age” for those who wait, up until age 70.

In addition, the lawmakers want the Social Security Administration to resume its previous practice of mailing paper statements to all future beneficiaries, and to do so more frequently. The updates would provide clear statements of how much each retiree would receive if they choose to retire at 62, 70, or anywhere in between.