Social Security Concerns Drive Early Benefit Claims

Many workers fear that Social Security won’t be available when they are ready to retire, according to the 2022 Schroders U.S. Retirement Survey.   

While 86% of workers age 45 and older are aware that they could boost Social Security payments by delaying the start of benefits, only 11% plan to put off claiming until age 70—when an individual reaches their maximum monthly benefit.

“Delaying Social Security to increase your benefit is a tried-and-true means of generating more income in retirement, but it’s a path few are prepared to take,” Joel Schiffman, head of strategic partnerships at Schroders, said in a statement. “Given increasing life expectancies and widespread concerns about not being able to live comfortably without a paycheck, the advantages of creating a retirement income strategy that maximizes your Social Security benefits can’t be overstated.”   

Schroders found that 32% of respondents plan to claim benefits before 70 because they are concerned that Social Security will be depleted and/or stop making payments, and 31% said they expect to need the money sooner. The research shows that 48% of non-retired workers plan to take Social Security between the age of 62 and 65, while 19% plan to claim between age 66 and 69 and 22% are unsure when they will file.   

Among the near-retiree cohort age 60 to 65, 11% of respondents plan to take their benefits at age 70. Of the cohort, 38% cited as their reason for not waiting that they will need the money sooner.

“This validates what we found in our survey last year when we first saw that only ten percent planned to wait until age 70 to take higher benefits,” Schiffman added.

The survey also found that 48% of respondents contributing to a workplace defined contribution retirement plan—401(k), 403(b) or 457—said their plan offers retirement income products, while 19% said the plan did not have income products and 33% were unsure. Among workers with a plan offering a retirement income product, 89% said they are likely to use the product when they retire, with assets remaining in the plan post-retirement.

The Schroders research found that the five features retirement plan participants want from an in-plan retirement income solution are:

• Lifetime income (52%);
• Consistent monthly paycheck-like income (49%);
• Low fees/cost (42%);
• Liquidity/Access to money whenever they want (40%); and
• Protection from market corrections/down markets (39%).

Almost half (49%) of all retiree respondents have no strategy to generate retirement income and plan to withdraw money as needed, the survey found.

Schroders research also shows that 23% of workers nearing retirement don’t know how much money they will need to generate in retirement to live comfortably, and 53% are concerned and 33% are terrified by the notion of regular employment checks ending upon employment separation. 

“More progress needs to be made to help defined contribution participants make the transition from saving to spending,” Schiffman said. “The SECURE Act was a crucial step toward putting retirement income front and center and made it easier for plan sponsors to introduce insured solutions into [defined contribution] plans. However, more needs to be done to educate participants on the importance of higher income replacement, and that comes from planning for retirement income early in their careers.”

The Schroders 2022 U.S. Retirement survey was conducted by 8 Acre Perspective among 1,000 U.S. investors nationwide age 45 to 75 from February 17 to February 28.