The Psychology of Social Security Claiming

Philosophers, op-ed writers and other big thinkers are among the many folks always scouring for linkages between seemingly disparate trends and occurrences.

Want a few examples? Well, there’s the link between the need for World War II defense workers and the post-war emergence of the film noir femme fatale. There’s the connection between choosing zero percent APR credit cards and the inclination to take longer vacations. And there’s the tie between the proliferation of karaoke bars and the surge in sales of earplugs and replacement glass.

But there’s one linkage I believe can never be explored, discussed and analyzed enough. That’s the link between psychology and personal finance behaviors.

I can’t begin to enumerate the times I’ve examined the approach to money of friends and acquaintances, and seen — or thought I did — connections between saving woes and self-esteem issues,  associations between spending and feelings of loneliness, bonds between indebtedness and delusions of grandiosity.

Scratch many big spenders, and you may find people still embarrassed by the humble homes in which they were raised 30 years before. Psychoanalyze women whose closets bulge with clothes they’ve never worn, and you may find ladies seeking to assuage deep-seated unhappiness through wanton consumerism. Focus on siblings with 180-degree-different approaches to money, and you’ll often find one more motivated by fun, the other more driven by fear.

A head-scratcher

So it was that I rejoiced when notified that a couple professors had finally zeroed in on one of the biggest puzzlers in the entire American money management realm, the choice of when to start monthly Social Security checks.

Even the most cursory look offers convincing proof that you will profit from delaying taking benefits and thus claiming larger monthly payments over your entire lifespan. Nonetheless, it is very common for Americans confronted with this choice to show as much restraint as would a cheetah over a fresh antelope kill. They lunge for their Social Security checks at the earliest possible age, 62.

By doing so, they lock in the lowest possible monthly Social Security payments — and they ensure they will suffer those low payments the rest of their lives.

In fact, in talking to people who have arrived at this decision tree and made their choice, I can’t recall one who delayed payments. All chose to ignore the widely-available advice of financial planners and retirement experts to postpone taking Social Security until around the age of 70, and by so doing treat themselves to payments 80 percent larger than those if the stream is begun at age 62.

Four influences on claiming

Recently, the professorial duo of UCLA’s Suzanne Shu and Duke University’s John Payne collaborated on a study that revealed four powerful psychological traits that influence decisions to take Social Security. The first is the individual’s feelings about his or her life expectancy. The second is his fear of losing money. The third is whether or not she believes the Social Security system is fair. And the fourth and final trait is, not surprisingly, the individual’s level of patience.

About 3, 000 people, most in their 40s and 50s, were surveyed in the study, whose findings were reported at the August meeting of the Retirement Research Consortium in Washington, D.C. People younger than those at Social Security-claiming age were chosen because they think about the issue, but haven’t yet acted on their plans. Shu and Payne used online surveys to ask respondents a series of questions, each designed to drill down into respondents’ psyches.

After probing the deep recesses of the study participants’ noggins, the profs also asked at what age participants would claim Social Security payments. It was then a simple matter of identifying what psychological traits were — and here’s that word again — linked with those who planned to file at the earliest ages.

Here’s what was discovered:

Life expectancy

Many people justify early Social Security claiming by arguing they likely won’t live long. The study confirmed this tendency, finding those who figured they’d cash in their chips early also cashed in on benefits early. But even expectations of longer lives skewed toward earlier claiming. For every 10 additional years folks thought they would live, Social Security filings were delayed by only six months.

Fear of loss

The respondents with the greatest fear of financial loss generally planned to claim their Social Security checks earlier. The irony is that studies have shown that people tend to live longer than they think they will, and that Social Security plays a larger and larger role in funding their lives the longer folks live. By locking in lower payments late in life, they’re trading fear of loss for assurance of loss.

The system’s fairness

The professors asked respondents how strongly they agreed with statements such as “I feel I’ve earned these retirement benefits.” The stronger the agreement, the earlier participants planned to seize their checks.


Patient study participants were more likely to report planning to take benefits later, while those with the least patience planned to line their pockets sooner.


There you have it. Despite all the evidence they will benefit by waiting to turn on the Social Security payment stream, people still let their psychological and emotional leanings outweigh their analytical selves.

In short, you can show people the math, but all too many retort: “Show me the money.”

6 Responses to “The Psychology of Social Security Claiming”

  1. Anonymous

    I took mine early, only out of necessity. I lost my job in 2009 and the only type of job I could find only paid $10.00/hour. I could not survive on that, plus a car note and food. I had a tough choice to make, so I made it. Everyone who takes it early might have different circumstances. If you can’t find a job (decent), what do you do? I still have to live somewhere and since I have had interview after interview and I am not 20 or 25, they got the job, not me. Even though I had the experience. What do you do?

  2. Anonymous

    I’m a classic patient pro-long-term benefit person, especially for financial stuff, but I am not convinced that it would be in my best interest to wait for two reasons.

    First, if I started claiming early but invest all that money instead of spending it, I think I would actually come out ahead. So unless the market is near record highs (like now) when I turn 62, I’m inclined to take it.

    Second, I’m not totally sure it won’t disappear at any time or, more likely, be forced to reduce payments even for people currently qualified to be collecting. So in the face of this risk it makes sense to collect ASAP, while there’s still money there to be collected.

  3. Anonymous

    Wonder about the income level/job status of those interviewed … any of them folks who were laid off at age 60 without a lot of prospects or savings? Any of them retiring early due to ill health?
    Not everyone gets the luxury of waiting until age 70 …

  4. Anonymous

    I really hope that when it comes time I’ll be smart and go for the mathematically optimal solution 🙂 Of course, I’m hoping and planning not to need social security anyway 🙂

  5. Anonymous

    I took my social security at age 62. I reasoned that, after doing the calculations, my break-even point was age 78, Since I will be much more physically active before age 78 than after, I wanted the funds to support that more active lifestyle. I have 6 siblings older than me and can see how, as we age into our 70’s and 80’s, we become less adventurous and seem to need less money to support our more sedate lifestyles.

  6. Anonymous

    I also see a connection to the increasing number who have jumped on the Social Security Disability wagon.

    In addition to the current income it provides, SSDI allows financially fragile workers to increase their ultimate retirement benefits, by allowing the recipient to delay taking retirement benefits.

    SSDI payments are automatically converted to retirement payments when the recipient reaches their Social Security full retirement age, while they would get 25% less if they took retirement benefits at 62.

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