Revisiting the Social Security Claiming Puzzle: Behavioral Preferences as Rational Explanations for Early Claiming

Nearly one-fourth of Americans claim Social Security at age 62, while only one-in-ten wait until age 70—a pattern that has long puzzled economists who argue delay is financially optimal. This paper develops a series of dynamic programming models to examine whether early claiming reflects mistakes or rational responses to preferences overlooked in standard analyses. Three behavioral factors are incorporated: a claim-retire linkage (a preference to claim benefits at retirement rather than managing a separate "bridge" period); front-loaded consumption preferences (a desire to spend more in the early, active years of retirement); and source-dependent utility (greater comfort spending from regular income like Social Security than drawing down a retirement portfolio). Using Epstein–Zin recursive utility with stochastic investment returns, medical expenditure shocks, mortality risk, policy risk, and bequest motives, results show that incorporating these empirically documented factors substantially lowers optimal claiming ages. Under the full behavioral specification, claiming at 62 is optimal for households with up to $800,000 in initial wealth—a wealth level that encompasses the vast majority of Americans approaching retirement. Results are qualitatively robust to alternative assumptions about mortality, bequest strength, tax treatment, and spousal or survivor benefits. These findings suggest that widespread early claiming may reflect genuine preferences rather than financial mistakes, though individual circumstances—including wealth, employment status, tax situation, and personal preferences—may provide incentives toward delay. Rather than uniformly prescribing delay, advisors should assess clients' goals, circumstances, and preferences and tailor recommendations accordingly.