Delayed Social Security Claiming: Why Do So Few Participants Delay Claiming Past Age 65?

We investigate why only a minority of retirees follow the recommendations of economists and financial journalists and delay claiming Social Security old-age benefits until at least their Full Retirement Age. We argue that low levels of savings and a reluctance to draw down financial assets contribute to a reluctance to delay Social Security claiming after retirement. We apply the numerical optimization simulation model of Sun and Webb (2010), using their code, to show the effects on optimal claiming age of longer life expectancy, lower real interest rates, and differing levels of liquidity constraints. We find that lower real interest rates and increased life expectancy increase the optimal claiming past age 65, but only for those not liquidity constrained (men) and not already at the highest claiming age (women). The optimal claiming age for people with a high level of liquidity ranges from 68 to 70, while for people with a low level of liquidity, it ranges from 65 to 66. Our empirical work supports these findings.