The Gap Between Knowing and Doing: A Hard Look at Social Security

I recently came across a new Schroders study that highlights a massive—and frankly, concerning—disconnect in retirement planning.

The data shows that 90% of working Americans do not plan to wait until age 70 to claim their Social Security benefits.

Why is this concerning? Because waiting until age 70 is the number one "textbook" strategy for maximizing your monthly benefit for the rest of your life. The difference between claiming at 62 (the earliest possible age) and 70 is significant, locking in a much larger, inflation-adjusted payment.

But the most fascinating and troubling part of the report is why people are planning to claim early.

This Isn't About Ignorance

My first thought was that this must be an education problem. People simply must not know that waiting gets them more money.

I was wrong. The study shows that 70% of people are perfectly aware that waiting results in a higher payment.

The reality is much heavier: people are being forced to claim early (either at 62 or their full retirement age of 67) out of sheer financial necessity. They are not making a strategic choice; they are making the only choice they have. They simply do not have enough personal savings in their 401(k)s or other accounts to "bridge the gap" between when they stop working and when they would ideally like to claim.

Because they need the cash flow, they are forced to lock in a permanently reduced benefit for the rest of their lives. This isn't a "claiming" failure. This is a planning failure.

The Real Shortfall

The real issue here is a massive retirement savings gap. This is compounded by a fundamental misunderstanding of what Social Security was designed to do.

Another study from Allianz confirms this, noting that 1 in 5 Americans incorrectly believes Social Security will cover all their retirement needs.

Let's be very clear: Social Security was never designed to be your entire retirement plan. On average, it's designed to replace about 40% of your pre-retirement income. The other 60% is supposed to come from your personal savings and pensions.

This gap in understanding and, more importantly, in savings is what creates the cash crunch that forces an early claim. It’s a decision made from a position of financial desperation, not financial strength.

Letting Fear Drive the Bus

The report highlights another powerful driver: fear.

Many people are claiming early because they are worried about the system's solvency. You’ve seen the headlines, I’m sure. The "insolvency" deadline of 2034, when the trust fund is projected to be depleted.

As an advisor, I have to be direct about this: claiming early out of fear is a poor trade.

First, "insolvency" does not mean benefits go to zero. It means that if Congress does absolutely nothing for the next decade, benefits would automatically be reduced by approximately 20%.

Now, think about the math. People are willingly taking a guaranteed, permanent 30% cut today (by claiming at age 62) to avoid a potential 20% cut a decade from now. It’s a bad financial decision driven by headlines, not logic.

Don't Gamble on the "Break-Even"

The other argument I often hear for claiming early is the "break-even" age. The idea is that if you don't live past, say, age 80, you would have been better off taking the smaller payments for a longer period.

Unless you have a specific, known health condition that significantly shortens your life expectancy, this is a gamble. And it's generally a bad one.

With average life expectancy for a 62-year-old now in the mid-80s, delaying benefits and receiving the larger check is the statistically winning move for most people. Planning your retirement on a bet that you will pass away earlier than average is not a sound strategy.

What This All Means: The Power of Options

This Schroders report perfectly illustrates why we cannot treat Social Security as an isolated decision. It is just one piece—albeit a critical one—of your entire retirement picture.

The only way to make the best claiming choice is to have a comprehensive retirement plan.

My goal for you is to have options. The whole point of diligently saving in your 401(k)s, IRAs, and other accounts is to build a large enough resource base to give you flexibility. We need to build those savings so that you have the financial freedom to bridge the gap from, say, age 67 to 70 if you choose to.

That freedom allows you to make this critical decision from a position of strength, not desperation. It allows you to look at the numbers, your health, and your family's needs and make a clear, logical choice—one that can lock in the maximum possible, inflation-adjusted income for the rest of your (and your spouse's) life.

This study shows what happens when you don't have a plan. Let's focus on building yours.