Why Americans plan to take Social Security earlier, and even leave retirement money behind

More Americans plan to tap Social Security benefits earlier than later, even if it means they won’t receive the maximum payout, according to asset management firm Schroders. 

Only 10% of non-retired Americans say they will wait until 70 to receive their maximum Social Security benefit payments, according to the 2023 Schroders U.S. Retirement Survey of 2,000 US investors nationwide ages 27-79 between February 13 to March 3.

Overall, 40% of non-retired respondents plan to take their Social Security benefits between ages 62-65, leaving them short of qualifying for their full retirement benefits. 

How much is full Social Security now?

Maximum benefits depend on the age you retire, and most Americans would be leaving thousands of dollars on the table for their retirement years. For example, if you retire in 2023 at full retirement age, your maximum benefit would be $3,627 (full retirement ages are different depending on when you were born so check here to see what yours is). However, if you retire at age 62, your maximum benefit would be $2,572. At age 70, your maximum benefit would be $4,555. 

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“The choice to forgo larger Social Security payments is a deliberate one, as 72% of non-retired investors – and 95% of non-retired ages 60-65 – are aware that waiting longer earns higher payments,” Schroders said in a statement. 

Why are Americans choosing to take Social Security earlier? 

Mostly fear.  

Forty-four percent said they were concerned that Social Security may run out of money and stop making payments, and 36% expect they’ll need the money, the survey said. 

Social Security is expected to be depleted in 2033, a year earlier than prior forecasts, the Congressional Budget Office said in June. 

“We have a crisis of confidence in the Social Security system and it’s costing American workers real money,” said Deb Boyden, Schroders head of U.S. defined contribution. “Fear about the stability of Social Security has people walking away from money that could improve their quality of life in retirement. Many are not even waiting for their full benefit let alone the maximum, which means they will have to create more income on their own, making it even more important to save and invest earlier for retirement.” 

How will Americans fund their retirements? 

Aside from Social Security, Schroders said non-retired Americans plan to generate income with: 

• Cash savings (58%) 
• Workplace retirement plan (53%) 
• Investment income outside of employer-provided retirement plan (40%) 
• Defined benefit/pension plan (20%) 
• Rental income  (14%) 
• Annuities (10%) 
• Cash value of life insurance (10%) 
• Reverse mortgage (4%) 

Meanwhile, retirees with plans to turn their savings into income will use: 

• Systematic withdrawals from retirement accounts (33%) 
• Dividend-producing stocks or mutual funds (24%) 
• Annuities (13%) 
• Individual bonds or bond mutual funds (12%) 
• CDs (12%) 

Schroders notes, though, that almost half (49%) of retirees said they don’t have any retirement income strategies. Instead, they just take money when they need it. 

How much will a comfortable retirement cost? 

Non-retired survey participants forecast they will need $4,940, on average, each month to enjoy a comfortable retirement. Millennials estimated they will need $5,135 per month, while those nearing retirement (ages 60-65) predicted they will need $4,855 monthly, the survey said. 

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What can Americans do to ensure they have enough for retirement? 

• A formal financial plan can make a huge difference.  

Monthly income for retirees with a plan is $5,810 on average, which is almost twice the $3,000 per month of income reported by those without a financial plan, Schroders said. 

• An adviser can help, too. The average monthly income including Social Security for retirees with a financial advisor is $5,075, above the average for all retirees of $4,170, the survey showed.  

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.