The timing of Social Security retirement benefit claims is one of the most consequential decisions older Americans make for their well-being and financial security in old age. Research has found that many adults claim Social Security earlier than would be optimal. Early claiming has important permanent consequences for retirement benefits, with a reduction of approximately 6.5% a year if a person claims before their Full Retirement Age, or FRA. For every year one delays claiming after FRA there is an 8% benefit increase. Even though the proportion has gone down considerably over the past three decades, more people still claim Social Security at age 62, the earliest opportunity to get benefits, than any other age. While individuals with distinct sets of preferences, mortality risk and economic circumstances will have different optimal claiming ages, there is evidence that at least a portion of the population is claiming their benefits earlier than is ideal for their financial well-being in old age.
But even if claiming decisions are sub-optimal from a financial point of view, do older adults regret claiming when they did? What can we learn from their ex post assessment of their decision of when to claim their retirement benefit? In order to answer these questions, my colleague Anya Samek and I conducted six focus groups with 68 older Americans (those who have already retired and made their claiming decisions) to learn about their satisfaction with their claiming and retirement decisions ex post (findings from this study are also reported here).
The majority of our respondents claimed Social Security early; i.e., either at the earliest opportunity to claim or before their FRA. To our surprise, we find that most of our participants tend not to regret the timing of their Social Security claim, even though they recognized that delayed claiming can be advantageous given the increase in benefits, if an individual has other means of support. Participants overwhelmingly argued that under their specific circumstances, claiming when they did was the best or only choice, even if they wished they could have waited longer to claim.
What might explain the contrast between satisfaction with early claiming decisions and the recognition of the advantages of delayed claiming? One explanation may come from theories of emotion regulation among older adults, which posit that people tend not to regret irreversible decisions, and that older adults are less likely than younger adults to regret past decisions and more likely to remember past choices as gratifying. Another explanation may be that while participants understand that, as a general principle, there are financial benefits to delayed claiming, their ex-post satisfaction is consistent with the preferences and circumstances that made their early claiming decision optimal.
So, to return to one of our key research questions: what can we learn from people’s ex-post assessment of their Social Security claiming decisions? Our work points to the importance of delving more deeply into what satisfaction means in the context of individuals’ retirement benefit claiming decisions. Prior research on retirement satisfaction often relies on a simple measure of satisfaction, which is typically measured by a single question along the lines of “How satisfied are you with your decision to retire?”. In contrast, our qualitative work enables us to understand the nuance behind a report of ‘satisfaction’. In our study, participants’ satisfaction with their own decisions about benefit claiming is high when satisfaction is defined as having made the right decision given one’s own circumstances at the time. Finally, we posit that understanding of satisfaction with the decision-making process around benefit claiming could inform potential decision-time interventions.