Many people who wind up with a smaller Social Security check because they claim their benefit early could have waited longer to file, thanks to funds in their IRA.
That’s the finding from a recently published study in the Journal of Pension Economics & Finance.
“It seems like there is a significant portion of the population claiming early even though they have the potential to finance a delay,” said Gopi Shah Goda, a co-author of the study and the deputy director and senior fellow at the Stanford Institute for Economic Policy Research.
Around 34 percent of beneficiaries who claim their Social Security before 66 — the current full retirement age for most people — have enough money in an IRA to finance the equivalent of at least two years of Social Security benefits, the researchers found. A quarter of them had enough to finance at least four years.
An IRA is a tax advantaged investment account in which you can contribute up to $5,500 a year (older savers can put away more). You can start withdrawing from the account at 59½, without penalities, although you will owe income taxes on the amount taken out.
The researchers studied tax data on individuals between the ages of 59 to 71 from the 1940 birth cohort. They also found that other available liquid assets, including stocks, bonds and certificates of deposit, could help people postpone their claiming decision even further.