Few workers plan to get the most out of Social Security

Few workers plan to get the largest Social Security check they can by waiting a little longer to claim, while everyone else is going with a use-it-or-lose-it mindset.

Only 10% of non-retired Americans say they will hold off until age 70 to receive their monthly Social Security check, according to a new survey from asset management company Schroders, the age when they receive the most in benefits. Four in 10 (40%) workers won’t even wait until their full retirement age and plan to tap their Social Security benefits between age 62 and 65, taking the smallest amount available to them.

The number one reason workers said they will take benefits before 70 is because they’re concerned Social Security may stop cutting checks before they reach that age, according to the survey of 2,000 US investors between 27 and 79, with 44% citing that reason.

That’s a problem because one of the key ways Americans can boost their ability to avoid outliving their savings — should they live longer, healthier lives than previous generations — is to delay taking Social Security benefits and boost their monthly check substantially for decades.

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"The data suggests that Americans believe Social Security may run out of money before they reach age 70," Deb Boyden, head of US defined contribution at Schroders, told Yahoo Finance. "We have a crisis of confidence in the Social Security system and that has people walking away from money that could improve their quality of life in retirement."

(Getty Creative)
(Getty Creative) · Douglas Sacha via Getty Images

There is some validity to their nervousness.

Social Security's reserves are projected to run out in 2033, according to the annual report from the trustees of the program. It won’t really go kaput, but at that point the entitlement program's trust fund will be able to pay out just 77% of benefits to seniors.

In that year, annual benefits would be cut by $17,400 for a typical newly retired dual-income couple, according to a new report by the nonpartisan Committee for a Responsible Federal Budget.

But the unwillingness to wait is more complicated than an overarching angst that the Social Security system is going up in smoke.

More than a third (36%) of those surveyed by Schroders expect they will need the money to meet living expenses and won’t be able to afford to hold back. Roughly the same share (34%) said that it’s their money and they want to get it as soon as possible. Finally, 13% said they were advised to take it earlier than 70.

"Individuals need Social Security benefits as an income replacement," Boyden said. "Unfortunately, the reality is there are many different reasons why Americans are not adequately prepared for retirement."