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This February 2005 file photo shows trays of printed social security checks waiting to be mailed from the U.S. Treasury.
This February 2005 file photo shows trays of printed social security checks waiting to be mailed from the U.S. Treasury.
Bradley C. Bower—AP

For most retirees, claiming Social Security as soon as possible is still the rule, not the exception. Nearly 40% of Americans file for benefits at age 62, the earliest claiming age. That's a costly move. Benefits rise by 7% to 8% a year until maxing out at age 70—only 2% of workers wait that long to file.

What could encourage older Americans to delay benefits and work longer? A team of economic researchers, led by the Wharton School's Olivia Mitchell, has an intriguing proposal: Add a lump-sum cash payment as an optional benefit for delaying Social Security filing.

This strategy has major economic potential. For starters, more people would work longer, which would improve their retirement security. In addition, their earnings would keep generating payroll taxes, thereby bolstering Social Security's troubled finances. These upsides would come at little cost to the Social Security program, since the lump-sum payment would be a portion of benefits already owed. “I think the delayed claiming option is really something we need to talk about,” Mitchell says.

An Incentive to Delay

Here’s how the strategy would work:

Say a 62-year-old retiree can receive a monthly benefit of $1,500 if she files immediately. By contrast, if she waits until age 67, which is full retirement age for anyone born in 1960 or later, the payment will rise to $2,143 per month. Under Mitchell's proposal, if the worker defers filing until 67, she can receive a $1,500 monthly check plus a lump-sum payment of $108,000. That amount would equal the real value of the difference between their age-67 and age-62 benefits, $643 a month, based on Social Security's estimates of life expectancy.

When Mitchell and her colleagues tested the concept on a group of nearly 2,500 people, using their actual Social Security earnings records, the reaction was overwhelmingly positive. Mitchell says she was especially heartened that the people who said they had been leaning toward taking benefits early, at age 62, were the most likely to delay claiming under her proposal.

The lump-sum option also eased fears that Social Security would run out of money—a key reason many claim early. People who did not trust the Social Security system because of its advertised financial problems were more likely to take the lump sum, according to Mitchell.

Rewards of Working Longer

Many of those surveyed also said they would continue working, which would put them on track to a more comfortable retirement. And more and more older Americans are eager to start new careers in their 60s and 70s, Mitchell points out. Those who work longer are also likely to be healthier and happier than retirees who leave their jobs.

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Despite the promising results, the proposal is unlikely to gain traction right now. Response to the idea at the national level has been positive, Mitchell says. But given Congressional gridlock, no one expects Congress to take up any substantive Social Security changes until after the presidential election. After all,

Still, a lump-sum approach may provide an attractive way for states and cities with financially strapped public pension plans to win support for capping future payouts. Getting something done at the local level, Mitchell said, “perhaps would generate interest in it at the national level” after the election. Let's hope so.

Philip Moeller is an expert on retirement, aging, and health. He is co-author of the recently updated New York Times bestseller, “Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security.” His companion book, “Get What’s Yours for Medicare: Maximize Your Coverage; Minimize Your Costs,” will be published in October. Reach him at or @PhilMoeller on Twitter.