For many Americans, Social Security isn't just a paycheck they receive in their golden years. It's a much-needed financial lifeline that helps them make ends meet during retirement.
According to an April survey from national pollster Gallup, 89% of current retirees lean on their Social Security payout as either a major or minor source of income. Meanwhile, an all-time high 88% of nonretirees anticipate relying on their Social Security income to some degree when they retire.
What you receive each month from Social Security can significantly impact your financial well-being. But as you're about to see, Social Security benefits can vary greatly by age.
Image source: Getty Images.
These four factors determine what Social Security will pay you
Before diving into what the program pays on average and by age, let's first look at the primary factors that determine what you'll be paid.
Though there are more than half a dozen factors that can affect your Social Security take-home pay, four stand out above all others. Two of the four -- your work history and earnings history -- are tied at the hip. The Social Security Administration (SSA) takes your 35 highest-earning, inflation-adjusted years into account when calculating your monthly benefit at full retirement age. The more you earn up to the maximum taxable earnings cap in a given year, the more you'll be paid during retirement. Just remember that for every year less of 35 worked, the SSA will average a $0 into your calculation.
The third significant payout determinant is your birth year. The year you're born dictates the bend points for your primary insurance amount. It also determines your full retirement age -- i.e., the age where you become eligible to receive 100% of your monthly benefit. The full retirement age for baby boomers ranges between 66 and 67, with anyone born in 1960 or later having a full retirement age of 67.
Fourth and finally, claiming age plays a huge role in determining what you'll receive from Social Security. Payouts can begin at age 62 or any age thereafter, but the SSA incentivizes patience. For every year an individual holds off on taking their benefit, their monthly payout grows by up to 8% through age 69. All things being equal, such as earnings history and birth year, an individual taking their payout at age 70 could receive up to 76% more per month than a retiree claiming at age 62.
The average Social Security monthly benefit by age
Now that you have a better understanding of the factors that determine monthly Social Security benefits, let's examine the average payout by age. Below you'll find a payment breakdown provided by the SSA as of June 2020 (rounded to the nearest whole dollar):
| Age | Average Benefit | Age | Average Benefit |
|---|---|---|---|
| 62 | $1,130 | 81 | $1,515 |
| 63 | $1,161 | 82 | $1,494 |
| 64 | $1,229 | 83 | $1,459 |
| 65 | $1,321 | 84 | $1,426 |
| 66 | $1,489 | 85 | $1,415 |
| 67 | $1,504 | 86 | $1,415 |
| 68 | $1,522 | 87 | $1,431 |
| 69 | $1,522 | 88 | $1,435 |
| 70 | $1,612 | 89 | $1,430 |
| 71 | $1,627 | 90 | $1,430 |
| 72 | $1,615 | 91 | $1,435 |
| 73 | $1,618 | 92 | $1,444 |
| 74 | $1,592 | 93 | $1,442 |
| 75 | $1,576 | 94 | $1,435 |
| 76 | $1,568 | 95 | $1,435 |
| 77 | $1,574 | 96 | $1,415 |
| 78 | $1,570 | 97 | $1,409 |
| 79 | $1,563 | 98 | $1,399 |
| 80 | $1,536 | 99 and over | $1,422 |
Data source: Social Security Administration, June 2020. Table by author.
The most glaring payout differences occur in the earliest years of eligibility. Between age 62 and 70, the average monthly payout catapults from $1,130 to $1,612. This huge average benefit gap can be explained by workers waiting to take their payout. Even though 67% of all current retired workers have their monthly benefit permanently reduced by the SSA (i.e., they claimed benefits prior to reaching their full retirement age), this 67% figure marks a 35-year low. We're witnessing newer retirees waiting longer to begin taking their payout, which should help boost average benefits for the 67 and up crowd even more.
You'll also note that the average retirement benefit flattens out considerably from about age 83 onward. This has to do with women having a longer average life span than men. Because women are more likely to stay home to raise children or care for sick family members, their lifetime earning potential is reduced. By age 83, women retirees account for a larger percentage of total recipients.
Image source: Getty Images.
Three simple tricks to increase your Social Security benefit
For the tens of millions of working Americans viewing these average benefit figures with disappointment, know there are a few simple things you can do to increase your eventual monthly payout.
First, waiting is typically a smart choice. While holding off on taking the benefit isn't going to be the optimal choice for everyone, a United Income study from June 2019 found it to be the best choice for a surprisingly large percentage of seniors. When comparing the actual claims of 2,000 senior households to what would have been their optimal claim in terms of the highest lifetime benefits received, 57% would have benefited from claiming at age 70. Further, over 80% would have been best served by waiting until ages 67 to 70.
Second, it's never a bad idea to consider working a bit longer. By the time you reach your 60s, you might've gained an abundance of knowledge and work skills that'll result in a higher wage or salary. This higher payout can be used to replace a lower-earning, inflation-adjusted year from your teens or 20s, pumping up your Social Security benefit.
Third and finally, consider using Social Security's do-over clause, SSA-521. Officially known as the "Request for Withdrawal of Application," this mulligan allows retired workers who regret their early claiming decision to request that it be undone. If approved by the SSA, the retiree will have to repay any benefits received, but will see their payout again grow by up to 8% annually. Keep in mind that SSA-521 is only an option within the first 12 months of receiving benefits.
