The data justifies waiting to claim Social Security benefits for many Americans.
Over 50 years ago, preschoolers at Stanford’s Bing Nursery School were given a choice. They could either eat one marshmallow immediately or wait 20 minutes and get two marshmallows. The kids were then tracked for decades. The ones who waited fared better in multiple ways, including higher SAT scores and increased self-worth.
American adults nearing retirement face their own version of the marshmallow test. They can claim benefits early at age 62. They can wait until their full retirement age. Or they can wait until age 70. The longer the wait, the higher the benefits.
It might seem like a no-brainer to push back as long as possible. But should you really wait until 70 to claim Social Security benefits? Here’s what the statistics show.
The above chart shows the cumulative benefits by age for claiming Social Security at ages 62, 67, and 70. Note that the calculations use the maximum Social Security benefit amounts mentioned earlier.
At age 76, the cumulative benefits for claiming at age 67 will exceed those for claiming at age 62. At age 87, the cumulative benefits for claiming at age 72 will top those for claiming at age 67.
Now for arguably the most important statistics. The average lifespan for men in the U.S. is 75. It’s 81 for women. Based on this, many Americans won’t be better off waiting until age 70 to claim Social Security benefits because they won’t live long enough for it to pay off.
However, there’s more to the story. For Americans who live to age 65, the average life expectancy is another 19.1 years for males and another 21.7 years for females. This changes the decision-making dynamics.
We haven’t factored in the time value of money, though. Even if you didn’t need Social Security benefits at age 67, you could claim them and invest the money in a low-risk alternative such as Treasury bonds. Doing so would push out how long it would take to justify delaying claiming benefits even further.