The Changing Picture of Who Claims Social Security Early

As individuals approach their 60s, they face the important decision about when to start claiming Social Security retirement benefits. This report by Philip Armour and David Knapp of the RAND Corporation examines the characteristics of those who decide to start collecting at the early eligibility age (EEA) of 62 compared with those who wait until later. A companion report, “The Consequences of Claiming Social Security Benefits at Age 62,” asks what financial consequences the decision to collect early might have for the individual over time.

Getty Images

Importantly, this research also speaks to the potential impacts of the novel coronavirus; as short-term furloughs during the recession turn into long-term unemployment, the findings suggest that employment losses may lead to earlier claiming—in particular among those with less education and those living in more rural areas. This could affect the financial security of a whole cohort of retirees in the coming decades given the penalties associated with early claiming.

Background

The Health and Retirement Study (HRS) is a panel survey that provides key data for this report. Started in 1992, it follows the same individuals over time and re-interviews them every two years. The survey responses allow for comparisons of retirement pathways for different cohorts of workers, from those born in the 1930s amidst the Great Depression, to Baby Boomers born in the early 1950s.

From the early 1990s to 2010s, the fraction of individuals claiming Social Security retirement benefits at age 62 declined from over half of the eligible population to less than a third. Over time, the context for these decisions and the cohorts themselves have changed, too. Longer life expectancies, an increase in the penalty for early claiming, and larger credits for delaying have increased the advantages of claiming at later ages. There has also been a noticeable increase in labor force participation in more recent cohorts, especially among women, and today’s retirees have more years of schooling, on average, than 62-year-olds in the 1990s. Additionally, employer-provided retirement plans have shifted from traditional defined benefit (DB) plans with sharp years-of-service entitlements to 401(k)s and other defined contribution (DC) plans that individuals can draw from more flexibly.

Who Claims Social Security Early?

The question is, are people claiming Social Security at later ages responding to the stronger incentives to do so, or because of other differences with those who claim earlier?

Key Findings

For both men and women, individuals who claim Social Security benefits at 62, as compared with those who claim later:

1. Have less education, on average;
2. Are more likely to live in rural areas;
3. Are more likely to already have a work-limiting health condition;
4. Have a lower reported likelihood of living to age 75;
5. Are less likely to have a job before turning age 62;
6. If employed before turning age 62, earn less, on average; and
7. If employed before turning age 62, are more likely to have a physically demanding job.

With respect to wealth and pension comparisons of age-62 claimers to later claimers, individuals who claim Social Security benefits at 62:

1. Are substantially more likely to already be receiving pension income; and
2. Are less likely to have defined contribution plan assets.

But even after accounting for the interrelationship of observable demographic, employment, and economic factors using regression analysis, these characteristics account for only a small fraction of the shift toward later claiming. Other reasons—such as longer life expectancy, a greater ability to work longer, better understanding of the financial benefits of waiting to claim Social Security benefits, and stronger incentives to claim later due to changes in Social Security benefit rules—likely influence people to delay claiming.

Read the companion report, “The Consequences of Claiming Social Security Benefits at Age 62.”