US Social Security Plans Highlight Concerns

• 43% of Americans plan to take Social Security benefits before age 67
• 10% plan to wait until age 70 to maximize benefits
• 39% cite financial need as the main reason for claiming early
• 38% are worried that Social Security will run out of funds.
• 36% want access to the money as soon as possible
• The average non-retired American expects to need $4,947 per month for a comfortable retirement, higher than the $4,258 reported by current retirees

According to the Schroders 2024 US Retirement Survey, a large portion of non-retired Americans are opting to claim Social Security before reaching the full retirement age of 67. The survey found that while most respondents are aware that delaying benefits could result in a larger monthly payout, many are unwilling to wait due to immediate financial concerns and fears about the sustainability of the Social Security program.

Financial uncertainty plays a major role in these decisions. Despite knowing that waiting until age 70 could boost benefits by up to 24%, only a small percentage are willing to hold off. A significant number of respondents are concerned about outliving their assets and generating enough income during retirement. This fear is exacerbated by rising living costs and uncertainty over future income sources.

The reluctance to delay Social Security benefits is a complex issue influenced by both immediate financial needs and long-term worries about the program’s viability. Experts suggest that delaying benefits could significantly improve retirees’ quality of life by providing larger, inflation-adjusted payments. However, this strategy is often overshadowed by the immediate necessity of cash flow, especially for those who lack substantial savings or other retirement income sources.

Deb Boyden, Head of US Defined Contribution at Schroders, notes that while there is no one-size-fits-all answer for when to file for Social Security, delaying as long as possible can significantly impact one’s financial stability during retirement. Boyden highlights that many Americans are behind on retirement savings, making the timing of Social Security claims crucial to maintaining a comfortable lifestyle during their later years.

What could these results mean?

For investors and consumers, these trends underline the importance of comprehensive financial planning. As more Americans prioritize immediate access to funds over maximizing benefits, there could be broader economic implications, including increased demand for alternative retirement income solutions. Financial advisors may need to focus more on education around the benefits of delaying Social Security and help clients develop strategies that address both short-term financial needs and long-term security.

The growing concern about Social Security’s future also suggests potential policy changes ahead, which could affect market dynamics, especially for investment products targeting retirees. Investors should stay informed about legislative updates that may impact Social Security and consider diversifying their retirement portfolios to mitigate risks associated with early benefit claims.

The Schroders survey highlights a critical issue facing many Americans as they approach retirement: balancing the need for immediate financial support with the potential benefits of delaying Social Security. This decision is influenced by a combination of personal financial pressures and widespread uncertainty about the program’s future, suggesting that more robust education and planning support are needed to help retirees make informed choices about their financial futures.