The recession is likely to prompt more people to claim Social Security early if they are forced to retire sooner than expected. But what else influences claiming decisions?
My guest on the podcast this week is Shai Akabas, director of economic policy at the the Bipartisan Policy Center (BPC). He is the co-author of a new study that examines the broader environment in which claiming decisions are made – and it finds that better information, descriptive language and policy incentives could all nudge people toward making more optimal Social Security strategies.
One thing I appreciate about this study is the way it defines “optimal.” It moves beyond the question of the total lifetime benefit a claimant will receive from Social Security, or “break-even” point analysis. That approach tends to push people toward earlier claiming, research has found, because it frames later claiming as a gamble on living longer than average – in other words, beating the longevity odds. Most people have trouble imagining themselves living longer than average lives, especially at younger ages. But the mortality data tells us that many will, and that for married couples chances are good that one spouse will survive to very old age.
Rather, BPC considered a range of holistic questions claimants should consider:
- Does your decision provide enough longevity insurance in case you outlive the rest of your savings?
- What is the need for money right now, instead of later?
- Will my decision impact my surviving spouse?