Social Security claiming (Image: Shutterstock)

When should I claim Social Security benefits? This is a key question older Americans grapple with every day.

Although benefits are available to claimants at age 62, the optimal age to claim benefits is 70, when payouts are at their maximum. The delay in claiming is the same as buying a greater inflation-adjusted annuity that will be paid for the entirety of the beneficiary’s life, the Bipartisan Policy Center, a Washington think tank, notes in a new report.

Most Americans, however, do not wait until age 70 to claim Social Security, according to the report.

The paper lays out ways the Social Security Administration could make information about Social Security more useful, consistent and clear for beneficiaries, and it recommends several policy reforms.

Potential Solutions

One thing SSA could do is reinstate the paper Social Security Statement so it can communicate annually with more Americans about their expected retirement benefits and Social Security’s rules, according to the paper. Officials could also visually redesign the statement and improve the information it provides to better highlight key points and correct common misconceptions.

SSA could also improve online tools to better emphasize the importance of claiming age and longevity insurance, present information more clearly and consistently, and target information to the workers whom it would most help.

When people make in-person office visits, SSA should ensure that claims specialists cover all necessary points by having them follow prompts on a form or computer and improving their procedure manual. The agency could also adjust how it evaluates claims specialists to prioritize the quality of information they provide to potential claimants.

The report says revising the official names of claiming ages would better reflect the implications of claiming decisions, for instance, by renaming the “early eligibility age” as the “minimum benefit age.” It says SSA should also explore how various framings affect claiming decisions.

Adding new steps to the claiming process may help older Americans better understand Social Security’s rules and the tradeoffs of different claiming options. These could include having claimants sign a form acknowledging permanent benefit reductions from early claiming; and giving them a blank bar chart on which to enter the monthly benefits they would receive if they claimed at age 62, their full retirement age and age 70.

Finally, SSA could engage with tax preparers, HR firms and private financial advisors to encourage people to set up online “my Social Security” accounts. SSA could also work with them to provide helpful information about claiming as workers prepare to retire.

Policy Reforms 

The Bipartisan Policy Center’s report lays out reforms to Social Security’s rules or other public policy that it says would help individuals optimize their claiming decisions.

It recommends elimination of the Retirement Earnings Test, or at least its rebranding or better education of the public about its rules, in order to clear up considerable confusion about the relationships between working and claiming retirement benefits.

It also recommends providing a lump-sum benefit for delayed claiming rather than some or all of the higher monthly benefits in place today, which could create a more effective incentive for people to claim benefits later.

The organization advocates for introduction of a mandatory add-on savings account to Social Security or a streamlined way for existing 401(k) retirement savings plans to facilitate later claiming. Similarly, it says, creating new tools to accumulate assets, such as state-sponsored auto-IRA programs, could help people delay claiming benefits.

Not least important, the report says Congress should ensure that SSA has sufficient funding to carry out all of its mandates and to improve its operations, communications and claiming procedures without affecting its other duties.

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