More Americans Claiming Social Security Early Amid Economic Fears

A significant increase in Americans applying for initial Social Security benefits has been observed this year, with many opting to claiming their retirement benefits earlier than originally intended.

Several factors are contributing to this trend, including job losses, rising living costs, and staffing reductions at the Social Security Administration (SSA). These circumstances are compelling more individuals to secure their Social Security benefits sooner rather than later, despite potential long-term financial consequences.

Financial advisers are actively assisting clients in navigating this critical decision about when to apply for Social Security.

“In my planning with clients, I try to keep emotion, political posturing, and media hype out of the conversation and utilize software and resources to educate our folks as to how Social Security works,” states Danielle Howard, a certified financial planner with Wealth By Design in Glenwood Springs, Colorado.

Understanding Social Security Basics

Social Security retirement benefits can begin at age 62. However, full benefits are only available upon reaching full retirement age (FRA). For those turning 62 in 2025, claiming Social Security early at that age would result in approximately 30% lower benefits compared to waiting until the full retirement age of 67.

Delaying Social Security benefits from FRA until age 70 earns delayed retirement credits, amounting to:

• Approximately 8% increase for each year until reaching 70
• Maximum benefits at age 70, at which point the credits cease accumulating
• Significantly higher financial advantages of waiting for those who live longer

Despite the financial advantages of waiting, data from the SSA indicates that nearly 30% of new Social Security beneficiaries claim benefits at age 62, while approximately 32% claim benefits after age 62 but before reaching their FRA.

Fear Driving Early Claims

There is substantial concern—whether warranted or not—among many individuals about potentially losing their Social Security benefits.

“We are hearing anecdotally that more people are claiming Social Security benefits earlier than they had planned because they are concerned Donald Trump and Elon Musk are taking that away,” Nancy Altman, president of Social Security Works, an organization advocating against program cuts, informed Yahoo Finance.

“This is very unfortunate because it is best to delay claiming as long as possible if you can, so that you get larger monthly checks for the rest of your life.”

A ‘Primary Source’ of Retirement Income

The decision regarding when to claim Social Security benefits is one that most individuals carefully consider as part of their retirement planning.

According to a new report from the nonpartisan Employee Benefit Research Institute (EBRI), approximately 3 in 5 workers and more than 4 in 5 retirees have considered how their claiming age impacts the amount they receive.

The possibility of Social Security being reduced or eliminated ranks as the primary retirement concern among retirees, according to a recent Transamerica Center for Retirement Studies report.

These concerns are not unfounded. The 2024 Social Security and Medicare Trustees Report projects that the combined retirement and disability trust fund reserves will be depleted by 2035. While funding will still exist to pay benefits at that point, without remedial action, beneficiaries could face a 17% reduction in benefits.

This potential reduction is particularly concerning given that most retirees rely on Social Security as their primary source of retirement income.

Why People Are Claiming Early

For many retirees or near-retirees, concerns about Social Security’s projected funding shortfalls and the program’s ability to fulfill future benefit obligations are paramount. Several factors are influencing early claiming decisions:

• Some individuals have experienced job loss this year and are entering retirement involuntarily
• Increasing difficulties in securing new employment, especially for older workers
• Fears regarding inflation eroding purchasing power
• Volatile stock markets leaving Americans in their 60s feeling financially vulnerable

The April jobs report indicated that the median duration of unemployment continued to increase, even amid otherwise robust hiring, as noted by Indeed Hiring Lab economist Cory Stahle.

“The share of workers who were long-term unemployed (out of work for 27 weeks or more) rose to 23.5% in April, the highest share in three years,” he reported.

Many individuals struggling with the decision to apply for Social Security indicate they are inclined to do so soon because they desire a steady source of income that adjusts annually to keep pace with inflation.

As the youngest baby boomers transition into retirement and the proportion of retiree households increases, there is growing concern about their financial stability—and claiming early can exacerbate this issue, according to a recent analysis from Georgetown University’s Center for Retirement Initiatives.

“Social Security claiming is amongst the most important financial decisions that older households make and can determine not only the income that individuals receive from Social Security but can also potentially influence financial well-being in the years following initial claiming,” according to the authors.

‘Optimizing Social Security’

Many financial advisers are assuming a therapeutic role to address client concerns about Social Security eligibility and benefits.

“We look at optimizing Social Security as one of their ‘buckets’ to tap into for cash flow,” Howard explained. “It is important that they understand that Social Security is a hedge against longevity as they can’t outlive it.”

The approach varies for each individual based on their circumstances, she added, “but the majority of our planning clients have several buckets of financial assets, and we push Social Security off until 70.”

Other planners are actively assisting anxious clients in making optimal decisions. “They’re worried they won’t live that long, and want to enjoy the money now. They’re worried that benefits will be cut if they postpone taking it,” stated Alvin Carlos, a certified financial planner and financial adviser at District Capital Management in Washington, D.C.

“For those who can afford to wait, I still think delaying is often the better choice, but I understand the anxiety, especially with all the headlines,” he noted.

Longevity Literacy

The duration of one’s life remains the great unknown in Social Security planning.

For reference, a 65-year-old man is expected to live approximately 19 more years, while a 65-year-old woman is expected to live approximately 22 more years.

Understanding average life expectancy can assist in calculating whether immediate Social Security benefits are necessary or whether waiting for increased payments is advantageous.

A friend recently disclosed that her husband has decided to commence Social Security at age 62.

His reasoning was based on not anticipating a long life. His parents only lived into their mid-70s, and he prefers to cease working now, collect his benefits, and focus on his artistic pursuits.