Why More Workers Are Retiring Now, But Delaying Social Security Until Later

Why more workers are retiring now but delaying Social Security

Illustration by Katie Couric Media

If you can manage it, the strategy brings in more long-term money. Here’s how.

While the Covid-19 pandemic created severe financial hardships for many Americans living paycheck-to-paycheck, those who are lucky enough to have cash to spare have found their investments doing better than they might’ve expected. That’s opened up a pathway to a new trend for older workers: retiring now, but drawing Social Security benefits later. Here’s what you need to know.

Are more people retiring since the coronavirus pandemic began?

They are. In the 12-month period ending in September 2021, the rate of retirement among workers aged 65 to 69 shot up 5 percent compared to the previous year, according to a Washington Post analysis of data from the Bureau of Labor Statistics. That translates to about 3 million new retirees as the coronavirus raged on — about twice as many as would have been expected, based on pre-pandemic trends.

What are these retirees doing differently?

During the same 12-month period when retirements were up by 5 percent, the number of workers applying for their benefits through Social Security decreased by 5 percent. So while more workers were leaving their careers behind, fewer of them were cashing in on the payments they’re eligible for after decades at their jobs.

How are retirees getting by without their Social Security checks?

It’s not that they plan to totally abandon their Social Security benefits forever. Rather, they’re making a strategic calculation to apply for Social Security later, in order to maximize the money they’ll get when they do start drawing the checks.

Social Security is designed so that the longer you wait to start taking payments, the higher those payments will be. Some retirees have found that their financial circumstances will allow them to stop working now and live on the money they currently have for a few years until they can start drawing a heftier Social Security check each month.

So how can they do it? Though Covid-19 has been a deeply difficult period for most Americans, stock prices have actually risen significantly since the pandemic began. Over the same timeframe, homeowners have seen the value of their property explode thanks to a boom in the housing market. That means people who’ve been working and saving for years saw superb performance on their investments.

Those same workers have also been able to trim costs based on how the pandemic changed their lifestyle. The months of lockdowns and travel restrictions cut down on their spending in the short term, and new options for working remotely shave down costs in the long-term, by eliminating the expense of commuting or living in a pricey city to be close to a specific office.

Those increased investment returns — combined with a decreased cost of living — have given some retirees more options in the immediate future, meaning they won’t get into a pickle if they wait a little longer for Social Security.

How do Social Security checks change based on when you start getting them?

The first thing you need to know is your “full retirement age,” which is based on your birth year. That system breaks down like this:

  • If you were born between 1943 and 1954, your retirement age is 66
  • If you were born in 1955, your retirement age is 66 and 2 months
  • If you were born in 1956, your retirement age is 66 and 4 months
  • If you were born in 1957, your retirement age is 66 and 6 months
  • If you were born in 1958, you retirement age is 66 and 8 months
  • If you were born in 1959, your retirement age is 66 and 10 months
  • If you were born in 1960 or later, your retirement age is 67

You can start drawing your Social Security benefits as early as age 62 — though the amount will be reduced. You can understand how much less you’ll get using this chart from the Social Security Administration.

On the flip side, if you choose not to take your benefits at your “full retirement age,” you can delay a few more years, and your monthly check will continue to grow until you reach 70. That’s the strategy employed by the folks we’re discussing, who have retired but haven’t yet withdrawn Social Security; the amount of their payments will continue to rise as they delay them. Here’s the official breakdown of how much more you can get by waiting a little longer.