A new study suggests that most Americans should wait until they're 70 or older to begin claiming Social Security benefits.
The National Bureau of Economic Research study found that Social Security beneficiaries are missing out on receiving nearly $200,000 by claiming too early.
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The study was conducted by David Altig, Atlanta Federal Reserve Bank executive vice president and director of research, and Boston University economists Laurence Kotlikoff and Victor Yifan Ye.
They used an analytical tool that incorporates all major federal and state tax and transfer programs.
"Social Security lifetime benefit optimization represents a clear means of improving the welfare of retirees," the study's authors wrote. "High-income retirees have the most in absolute terms to gain from maximizing their lifetime benefits.
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"But low-income retirees can raise their living standards by a far higher percentage. Whether rich, middle-class, or poor, what's required is simply patience — waiting to apply for the right benefits at the right time."
People are eligible to begin receiving Social Security benefits at age 62, though those who start at that age receive 30% less.
"We find that virtually all American workers age 45 to 62 should wait beyond age 65 to collect," the study found. "More than 90 percent should wait until age 70. Only 10.2 percent appear to do so.
"The median loss for this age group in the present value of household lifetime discretionary spending is $182,370. Optimizing would produce a 10.4 percent increase in typical workers' lifetime spending."
The finding added that lifetime spending gain exceeds 17% for 1 in 4 Americans and 26% for 1 in 10.
Among the poorest fifth of those ages 45 to 62, the median lifetime spending increase is 15.9%, with 1 in 4 gaining more than 27.4%.
"Young as well as older workers can gain from postponing Social Security benefit collection. Such delay does, however, come at a higher cost — far more workers becoming cash-flow constrained," the study's authors wrote.
"On the other hand, the typical temporary living standard reduction is small. A modicum of workers don't gain from waiting to collect their retirement benefits. Such workers lose benefits from other transfer programs and face higher lifetime taxes, with the present value net tax increase exceeding the gain in lifetime Social Security benefits."
In October, the Social Security Administration announced a 8.7% increase, the highest cost-of-living increase in 40 years.
The cost-of living adjustment means the average recipient will receive more than $140 extra a month beginning in January, according to estimates released Thursday by the Social Security Administration.
The maximum federal Supplemental Security Income benefit for individuals will jump to $914 per month in 2023, up from $841 this year. The maximum will be $1,371 next year, up from $1,261.
Analysts estimate Social Security insolvency might occur as early as 2034 unless action is taken by Congress.
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