• Derek Tharp: Why Delaying Social Security Benefits Isn’t Always the Best Decision
• Most Americans Claim Social Security Well Before Age 70
• The Performance of the 60/40 Portfolio: A Historical Perspective
• Retirees Spend Guaranteed (Lifetime) Income, Not Savings

When it comes to Social Security claiming strategies, there’s a message you’ve probably heard over and over: wait until age 70 to maximize your benefits.

On paper, the logic seems simple — delay claiming, and you’ll lock in a larger monthly check for life.

But here’s what’s fascinating: despite that seemingly obvious math, only about 10% of Americans actually wait until age 70 to claim their benefits. In fact, nearly ⅓ of people claim as early as possible at age 62, and the vast majority – around 61% – file before reaching full retirement age.

So what’s going on here? Are millions of Americans making a massive financial mistake? Or is there something the experts are missing?

The truth is, the answer isn’t as black-and-white as most think.

In today’s episode, I’m sharing findings from a new research article that presents valid reasons why waiting until 70 isn’t always the no-brainer decision it’s often made out to be.

Welcome to another episode of the Stay Wealthy Retirement Show. I’m your host, Taylor Schulte, and every week I cover the most important financial topics to help you “stay wealthy” in retirement.

Ok, onto today’s episode.

Why Delaying Social Security Might Hurt Your Retirement

Before we dive into the risks of delaying Social Security, let’s first understand why the popular, broad-based recommendation is to wait until age 70 to claim benefits.

First, your benefit amount, your monthly check, increases substantially the longer you wait.

For example, if you claim at 62, you might get $2,100 per month. If you wait until your full retirement age of 67, the amount jumps to $3,000. Hold out until 70, and you’re looking at $3,720 per month – a 77% increase from the age 62 amount. Second, Social Security is one of the few sources of guaranteed, inflation-protected income available to most Americans.

In a world where pensions are increasingly rare, this makes Social Security incredibly valuable. And third, delaying helps protect against longevity risk – which is the possibility of outliving your money if you end up living longer than expected.

On the surface, this advice seems rock solid and the textbooks would agree. So why then do 90% of Americans claim before age 70? Are they simply making irrational decisions?

Sure, in some situations, it’s a critical source of income, and Social Security is necessary to live. But even for successful retirement savers, there are legitimate reasons to claim benefits earlier. And as researcher Derek Tharp noted in his recent work, those reasons often get lost in broad reaching, one-size-fits-all discussions on the topic.

Reason #1

The first reason Derek brings to the surface in his most recent report is more of an issue with how the timing questions are analyzed, and it involves something called the “discount rate.”

For those unfamiliar, the discount rate is the percentage used in finance to figure out how much money in the future is worth in today’s dollars. For example, imagine your friend promises to give you $100 for your birthday, but you can choose to get it now or five years from now. The discount rate you use would help you figure out how much that future $100 is really worth today — because getting the money now means you could spend it, save it, or even invest it instead of waiting.

So, how does this relate to social security timing?

Well, many studies advocating for delaying social security use very low discount rates, often around 2%, but sometimes as low as 0% after inflation. Said another way, these researchers are assuming a dollar of benefits at age 95 is worth exactly the same as a dollar today.

But here’s the problem Derek points out, if it’s not already clear – using an extremely low discount rate doesn’t reflect how most retirees actually save and invest their money. Most people don’t have portfolios earning 0% or even 2% after inflation. Instead, they have a mix of stocks and bonds that historically have earned closer to 5% above inflation on a properly constructed global 60% stock / 40% bond portfolio.

And this isn’t just a nerdy academic distinction, it completely changes the math. If you assume you can earn 5% above inflation on your investments rather than 0-2%, delaying Social Security becomes much less financially attractive.

Think about it this way: if you claim at 62 instead of waiting until 70, you’ll receive smaller checks, but you’ll get eight additional years of payments. You could invest some or all of those early payments and potentially come out ahead, especially if your investments perform reasonably well. So, if 0-2% is too low, what is the right discount rate to use?

Well, it depends where you plan to withdraw your money from to fund your retirement while you delay social security. If it’s from a 60/40 stock/bond portfolio, the discount rate should reflect that portfolios future expected return. As you might be thinking, investing is risky, and we’re only talking about an 8-year time period here. Anything can happen in 8 years in the markets, making it tough to determine an accurate future expected return of your portfolio.

So investing is risky, and it’s hard to quantify the risk in the short term, but focusing only on investment risk ignores other factors that could actually make delaying Social Security the riskier move.

Reason #2

Before we talk about those other factors let’s stay in the investment realm for a moment and cover the second reason why claiming early might make sense, and that is to protect against Sequence Risk.

Many social security studies assume that retirees take the same inflation-adjusted amount from their portfolios each year, but in reality, most people who delay Social Security often have to take larger withdrawals in their first few years to cover expenses. This front-loaded spending makes them much more vulnerable to early market downturns. If the market happens to drop significantly during those early retirement years, those extra withdrawals can magnify your losses and permanently damage your nest egg.

While retirees can manage this risk somewhat by proactively planning ahead, building a proper war chest, or even retroactively claiming benefits up to six months back if a storm hits early in retirement, it’s clear that delaying Social Security can magnify sequence of returns risk — a factor too often ignored in academic models but very real in the lives of retirees.

Reason #3

Ok, the third reason why claiming earlier might make sense is mortality risk. In short, while delaying social security protects against you living longer than expected, claiming it early protects against dying sooner than expected.

For example, if you delay until 70 but pass away at 72, you’ve potentially left hundreds of thousands of dollars on the table that could have been spent enjoying your retirement or passed on to loved ones.

Retirement researchers often account for mortality risk by adjusting for average life expectancy, but that doesn’t reflect how real life works. Telling someone on their deathbed that, on average, they made the right choice by delaying social security is meaningless.

In Derek’s paper he quotes author Nassim ta·luhb who famously warns that you wouldn’t cross a river that’s “on average” four feet deep if parts of it are ten feet deep.

Well, the same can be said for Social Security: focusing only on averages ignores the real danger of dying before those higher payments ever materialize. When deciding when to claim benefits, we can’t just think about living longer — we also have to think about what happens if we don’t. And this leads to a deeper truth: which is that this isn’t just about maximizing money in your pocket, it’s about maximizing the value of your life.

As Bill Perkins argues in his book “Die With Zero,” many Americans who were diligent savers wait too long to retire and then underspend in retirement. They focus too much on lifespan and not enough on “health span” – the period when you’re healthy enough to truly enjoy your retirement.

This matters for Social Security decisions because money received earlier in life can buy more than just goods or services — it can buy experiences and memories that simply can’t be replicated later.

You could argue that twenty thousand dollars at age 62 has a much higher “life value” than the same amount at 95. In Derek’s paper, he also notes that Health Span can influence how people feel about retiring, and that many retirees view claiming Social Security as permission to stop working.

So, delaying benefits can unintentionally keep people in their jobs during their healthiest years. Even though academics separate “retiring” from “claiming benefits,” real people don’t always see it that way. For many, waiting to claim Social Security means waiting to retire. And sacrificing your best, most energetic years in exchange for a slightly higher benefit later might not be worth the trade-off.

Reason #4

The fourth consideration for claiming benefits is flexibility. Once you start receiving Social Security, your monthly benefit is essentially fixed (aside from cost-of-living adjustments). But your investment portfolio offers much more flexibility.

If you claim Social Security earlier and preserve more of your investment portfolio, you maintain the ability to take lump sums when needed – perhaps to help a child financially, fund a once-in-a-lifetime trip, or cover an unexpected expense. You can’t call the Social Security Administration and ask them to advance you six months of payments, but you can certainly withdraw a chunk from your investment account if needed.

If a retiree drains or spends a large portion of their investment accounts just to delay Social Security, they might end up with more guaranteed income for the rest of their life but no financial freedom.

This is an overly simplified example, but imagine spending $50,000 per year from your investments until age 70, only to reach age 70 and start receiving a $50,000 annual benefit with very little savings left — that person has essentially traded flexibility for security. While wealthier retirees can maintain flexibility no matter what, for those with modest savings, keeping options open can make all the difference between a rigid and a rewarding retirement.

Reason #5

The next reason to consider claiming early probably won’t come as a huge surprise, and that is policy risk.

Policy risk refers to the uncertainty around future changes to Social Security — and while there is strong evidence to support that it shouldn’t keep you up at night, most Americans, rightfully so, still worry about it. In fact, a 2025 AARP study found that only 36% of Americans feel confident about Social Security’s future, largely because the program’s trust fund is projected to run short by 2033.

Now, some people mistakenly believe that depletion means benefits will disappear entirely, but in reality, it would likely mean smaller checks, unless Congress takes action. Even so, the possibility of benefit reductions, delayed reform, or unexpected policy changes is enough to make many retirees nervous.

The key point Derek makes in his article is that policy risk is legitimate and we shouldn’t ignore it, although that’s effectively what happens when, quote, “researchers use a 0% discount rate and assume that one dollar of Social Security income today is equivalent to a dollar at age 90, without accounting for the possibility of future cuts.”

Reason #6

The 6th and final reason to consider claiming earlier might be the most compelling, and that is the of psychology of spending in retirement – something that doesn’t get nearly enough attention in these discussions.

In short, most people find it easier to spend Social Security income since it feels steady and guaranteed, while tapping into their investment accounts can feel uncomfortable. Even more challenging, watching a portfolio balance go down after decades of saving can trigger hesitation to spend and enjoy retirement, even when spending is perfectly safe.

The research supports this. In fact, in Derek’s paper, he referenced a fascinating 2025 study from the Retirement Income Institute. The study found that retirees spend about 80% of guaranteed, predictable lifetime income from sources like Social Security and pensions.

On the other hand, they only spend about 50% of their portfolio income. So, claiming Social Security earlier could actually help retirees spend more confidently and enjoy their money when they’re healthiest, rather than delaying and potentially missing out on those years.

While there are plenty of valid reasons backed by research to delay social security, it’s important to acknowledge that retirement isn’t just about financial optimization – it’s about life optimization.

What good is having the mathematically perfect claiming strategy if it leads to anxiety about spending and a less fulfilling retirement?

Now, I want to be extra clear: I’m not suggesting that everyone should claim Social Security at 62. The right claiming strategy depends on your unique situation, including your health, family history, other income sources, tax situation, and personal preferences.

For some people – especially those with a sizable nest egg, in excellent health, and maximizing tax planning in their gap years— delaying until 70 might still be the optimal strategy.

But for others, claiming earlier might provide more value, even if it’s not the mathematically “optimal” choice according to some financial models.

What Factors to Consider When Deciding When to Take Social Security

So, what factors should you consider when deciding when to claim?

First, consider your health and family history. If longevity runs in your family and you’re in excellent health, delaying might make more sense. If not, claiming earlier could be more beneficial.

Second, think about your other income sources. If you have substantial savings or pension income, you might have more flexibility in your claiming decision.

Third, consider your spending preferences and retirement goals. If you have dreams you want to pursue early in retirement when you’re still active and healthy, claiming earlier might help fund those dreams.

Fourth, think about your comfort with spending from different sources. If you know you’ll be reluctant to draw down your investment portfolio, claiming Social Security earlier might help you enjoy your retirement more fully.

And finally, while I’m certainly biased, consider working with a retirement planner who can help you analyze your specific situation, facilitate important conversations, and develop a claiming strategy that aligns with your unique retirement plan and goals.

If you need and want professional help, my team and I would be honored to have a conversation to see if we would be a good fit to work together. You can follow the link in the episode description right there in your podcast app to schedule a Free Retirement Strategy Session.

Bottom Line

At the end of the day, while the standard advice to delay claiming until 70 might not be right for everyone, it’s still crucial to make an informed decision rather than simply claiming as early as possible without careful consideration.

Take the time to understand your options, analyze and evaluate the numbers for your specific situation, and think deeply about what will give you the most fulfilling retirement.

This isn’t a decision to make lightly or based solely on what friends or family members have done. Social Security claiming is one of the most important financial decisions you’ll make in retirement, and it deserves thoughtful analysis and consideration.

Thank you, as always, for listening, and once again, to view the research and resources referenced in today’s episode, just head over to youstaywealthy.com/255

Disclaimer

This podcast is for informational and entertainment purposes only, and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services.