We’ve all heard the grim prediction: The Social Security trust fund likely will run out of money soon, possibly as early as 2034.
As it turns out, articles with “doomsday” headlines about Social Security may have a strong influence on when retirees decide to claim their benefits.
Workers who read headlines focusing on the predicted trust fund depletion date planned to claim benefits a year earlier, on average, than those in a control group, according to a new report from the Center for Retirement Research at Boston College.
On its surface, that might seem like a rational decision. But researchers at the center say it more likely reflects a failure to understand the true status of the Social Security program, which is not as grim as headlines suggest.
Study authors Laura Quinby and Gal Wettstein point out that these headlines ignore the fact that even after draining the trust fund, there still would be enough ongoing revenue to support 75% of scheduled benefits.
Readers who get caught up in such headlines might mistakenly believe “that all future benefits are insecure,” the authors write. That could motivate them to make decisions about Social Security benefits that they otherwise would not, which could then hurt their long-term retirement prospects.
The authors write:
“For example, workers might claim earlier than they would have otherwise in the belief that future reforms will spare individuals already receiving benefits. Claiming at age 62 instead of the Full Retirement Age (FRA) currently reduces monthly benefits by 30 percent, and recent evidence suggests that it also reduces lifetime benefits.”
The study authors also say their research indicates that “in no case do workers plan to increase their saving to offset future benefit cuts.”
The researchers conclude that “media coverage of the trust fund makes many workers fear an unrealistically severe cut to their future Social Security benefits.” If these workers claim benefits early, “they will lock in lower monthly benefits without increased saving to make up the gap.”
Should you claim your benefits early or later? The answer is not the same for everyone. For more, check out: