I came across these alarming statistics:
- For almost one in five (19%) of social security recipients, social security is their sole source of income.
- For 30% of social security recipients, social security accounts for 90% of their retirement income.
- More than half (56%) of those on social security rely on social security for more than half of their income.
Source: NASRA, Social Security Administration
With social security making up a significant portion of so many retiree's income, why do so many people take social security early, permanently reducing their lifetime income? It is highly illogical (Yes, I grew up watching Star Trek, and am a big fan of Dr. Spock.)
By simply waiting four years to take social security, from age 62 to 66, they can experience a 36% raise. See example in When To Take Social Security for details.
Or read Should You Take Social Security At Age 62 to see if you fit a set of criteria that would warrant waiting, or taking it early.
If you did take social security early, it's not too late to reconsider. You can buy back your social security benefits and reset them to the amount you would receive at full retirement age. Sounds complicated, but this is an effective strategy for those who have money available in non-retirement accounts to use to do the buy-back.
I hear people say they take their benefits early because they want the money in their pocket now. Fine, if you plan on dying young. But if you plan on living to life expectancy or longer, you'll get substantially more out of Uncle Sam by waiting. As usual, we humans don't seem to be too effective at making smart decisions when the benefits come in the form of delayed gratification. And we cost ourselves thousands upon thousands of dollars over our lifetimes because of it.