The Optimal Time to File for Social Security Benefits

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Abstract
Under current Social Security rules, a newly retired worker can affect the age structure of benefits that he or she will receive by choosing when to file for a claim for benefits: the longer the claim is deferred, the greater the monthly benefit will be. This article examines the alternatives available to individuals and presents a life cycle model of retirement planning that determines the optimal time to file for benefits. The model is applied with the Social Security rules for 1998 and with an idealized system in which all adjustments to benefits are actuarially fair. It is shown that in many cases individuals will choose to file for benefits several years after retirement instead of immediately. The gain achieved by doing this can be substantial.