How PG&E Workers Can Decide When to Start Taking Social Security Benefits

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For PG&E employees nearing Retirement, understanding emotional factors such as psychological ownership and loss aversion may help with making smarter decisions about when to claim Social Security, and helping with a financially secure retirement, 'says [Advisor Name], of The Retirement Group, a division of Wealth Enhancement Group.

Taking into account psychological as well as health influences, PG&E workers can make better Social Security claiming decisions to maximize Retirement benefits and long-term financial security, 'says [Advisor Name], a representative of The Retirement Group, a division of Wealth Enhancement Group.

In this article we will discuss:

1. The psychological factors that influence early Social Security claimants.

2. Financial effects of early versus delayed claiming on lifetime retirement income.

3. Role of financial planners and policymakers in helping retirees make sound claiming decisions.

Many PG&E workers make a tough decision about Social Security benefits. Though financial planners typically suggest putting off benefits as long as possible to maximize retirement income, many retirees choose to claim benefits early. So this is what has been called, and a new study explores the psychological factors underlying such choice.

The research by Suzanne Shu of Cornell University and John Payne of Duke University finds psychological ownership and loss aversion to be two critical psychological traits driving insurance claims decisions.

Psychological ownership involves feeling that something is one's own. PG&E employees who believed they earned their Social Security benefits were more likely to choose early claiming, the study found. They feared not getting all of their contributions if they died earlier than the average life expectancy because they considered themselves owners of their benefits.

The second is loss aversion — fear of losses more than desire gains. Moreover, higher loss aversion among PG&E employees increased the odds that they would file early for Social Security benefits because they feared not getting all of them.

PG&E employees must understand early claims have serious financial consequences. The work showed that early claiming could cut the present value of a worker's lifetime discretionary expenditure by USD 182,370 compared with what would be optimal under other conditions.

The researchers found educational materials and conversations with financial planners that address the financial costs of having these psychological traits might help retirees make more rational claiming decisions. However, a straightforward data presentation demonstrating the added value of deferring claims had no effect. It may be because prospective recipients focus on the possibility of dying before the average life expectancy, which causes loss aversion and early claiming.

Consider a single male 62 years old who will receive USD 1,789 a month at full retirement age (67) as an example of how delaying claiming could affect him. He will be ahead of a late claimant if he claims early at age 62 and lives to age 70. But if he dies at age 90, late filing is more than USD 130,000 more advantageous.

The study raises important questions for upcoming and current retirees. Though some will point to natural tendencies toward psychological ownership and loss aversion, policymakers and financial planners must understand how these personality traits influence the decision to apply for Social Security.

PG&E employees nearing retirement need to know the consequences of early claiming. Consider your health situation and family life expectancy if you decide this. Early claims may be reasonable in some cases if ill health or shorter life expectancies are significant factors.Retirees who have taken their benefits can always rethink their decision later. If your health and finances permit, you may be able to maximize your retirement income through delayed claiming.

Policies and financial planners can help directly address these psychological traits. Educative materials must help retirees understand their claiming options, how early versus delayed claiming might affect them and how planning for an extended retirement might help them. Furthermore, financial advisors could have candid conversations about how claiming decisions affect people emotionally and assist retired people in making educated decisions tailored to their situation.

As you near retirement, plan to claim Social Security benefits now. Making educated decisions can improve your retirement standard. You can decipher the Social Security claiming maze and enjoy a financially secure retirement with the right knowledge and direction.

A study in the Journal of Financial Planning in June 2023 estimated that retirees who wait to claim Social Security benefits until Age 70 could see an average 24% increase in their monthly benefit payments compared to those who claim at Full Retirement age (FRA). Such a huge jump could dramatically raise the retirement standard of living among our 60+ target audience of PG&E retirees and baby boomers. Waiting until age 70 could offer a way to maximize Social Security and improve retirement savings.

Discover how psychological ownership and loss aversion influence insurance claims. Understand what you can do — early beneficiaries can trim USD 182,370 of lifetime discretionary spending. Delaying benefits by 24% from the Full Retirement Age means benefits would increase by 24% over what you would get if you claimed at the Full Retirement Age. If you are a current retiree or an employee about to retire, do not delay securing a comfortable retirement. How to navigate the Social Security application maze & make informed financial decisions.

Choosing when to claim Social Security benefits is like planning a cross-country road trip. Imagine you have two routes to choose from: One is short and uncertain, the other long but smoother and scenic. Early claiming is like taking the shortest route to your destination — it gets you there faster, but you miss out on the sights along the way. Delayed claims are like taking the longer route — you have to wait — but the journey is more rewarding and financially secure. As a mature traveler would do, so should our 60-year-old audience of PG&E employees approaching retirement and current retirees — consider your options, go for it — and make an informed decision that leads to a satisfying retirement.

Added Fact:

And aside from the psychological factors discussed in the article, PG&E workers should also consider their own health and longevity before they begin receiving Social Security benefits. For healthy people with a long tradition of longevity, delaying benefits until later ages such as 70 can result in a larger lifetime income. While some psychological factors such as loss aversion may influence the decision, the potential financial benefits of delaying benefits should be balanced against individual health considerations as they may affect retirees' financial security.

Added Analogy:

Deciding when to start collecting Social Security benefits is like choosing the right time to harvest a tree you've grown up with for years. Imagine you are an orchardist tending a fruit tree in your garden. You know that if you picked the fruit too early it may not be at its peak sweetness and size and you would not have enjoyed the full bounty. Or wait too long and the fruit will be overripe and will just plop to the ground. And just like that, the timing of Social Security benefit claims is delicate. Taking advantage of too early claims may leave benefits on the tree, and waiting too long may mean missing out. You must assess whether your financial orchard is ready for harvesting — and not just the fruit itself — but you too. Doing so lets you enjoy the fruits of your labor in retirement.

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Sources:

1. Shu, Suzanne B., and John W. Payne.  Social Security Claiming Intentions: Psychological Ownership, Loss Aversion, and Information Displays . National Bureau of Economic Research, 2023,  nber.org .

2. Shu, Suzanne B., John W. Payne, and Naoko Sagara.  The Psychology of SSA Claiming Decisions . Center for Retirement Research at Boston College, 2014,  crr.bc.edu .

3. Lynch, Michael. 'A Case for Procrastination: Why Waiting to File for Social Security Benefits Pays Off.'  Hartford Funds , 2023,  hartfordfunds.com .

4. Payne, John W. 'The Psychology Behind Claiming Social Security Too Early.'  Duke Fuqua Insights , 2024,  fuqua.duke.edu .

5. Collinson, Chris. 'Waiting until Age 70 to Claim Social Security Gets You a Lot More Money.'  MarketWatch , 2024,  marketwatch.com .