Social Security Claiming Timing and Older Adults’ Financial Wellbeing

How well individuals optimize the timing of their Social Security (SS) claims can influence their financial wellbeing. In this paper, we evaluate the impact of Social Security claiming timing on older adults’ financial outcomes by constructing an Optimization Failure (OF) index, which measures the difference between optimal and observed claim timing. The analysis uses data from the Health and Retirement Study (1992 to 2020) linked to restricted Social Security Administration records and Working Trajectories data. The empirical strategy utilizes the OF index as the main predictor and a two-stage least square approach to estimate the effect of sub-optimal SS claiming (OF index) on financial wellbeing using several indicators including liquid savings, retirement assets, housing wealth, and total wealth. We find that sub-optimal claiming is associated with decline in real estate and total wealth, while also reducing liquidity constraints in the post-claiming period. We also find that these links are more prominent among sub-optimal early claimers compared with those claiming sub-optimally late.