For most Americans, Social Security provides, or will eventually provide, more than just a check or direct deposit each month. It represents a vital source of income that's consistently helped between 80% and 90% of retired workers cover some of their monthly expenses, according to more than two decades of annual surveys from national pollster Gallup.
For this overwhelming majority, maximizing what they'll receive from America's top retirement program is of great importance -- and that all starts with understanding the four key factors that influence your monthly Social Security benefit.
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The ins and outs of how your Social Security benefit is calculated
Although there are a number of factors that can affect how much of your Social Security check you'll get to keep, such as the retirement earnings test for early filers and the potential for a portion of your earnings to be taxed at the federal and/or state level, the nuts and bolts of your payout boil down to four elements: Work history, earnings history, full retirement age, and claiming age.
Your work history and earnings history go hand-in-hand. The Social Security Administration (SSA) accounts for your 35 highest-earning, inflation-adjusted years when calculating your monthly benefit. Regardless of your earnings history, a $0 will be averaged in for every year less than 35 worked. Thus, it's not only beneficial to make as much as you can in the years you work, but to also work a minimum of 35 years if you want any chance of maximizing what you'll receive from Social Security.
The third factor, your full retirement age, is determined by your birth year. It represents the age where eligible workers can receive 100% of their monthly retirement benefit. The full retirement age for most Social Security beneficiaries is 66, 67, or perhaps somewhere in between.
The fourth, and arguably most important, factor is your claiming age. Although retired-worker benefits can begin as early as age 62, any claim made prior to reaching your full retirement age permanently reduces your monthly payout.
On the other hand, every year you wait to claim your Social Security benefit can increase your eventual monthly payout by as much as 8%, through age 69. Claiming your Social Security benefit after your full retirement age will increase your monthly payout above 100%, as shown in the table below.
| Birth Year | Age 62 | Age 63 | Age 64 | Age 65 | Age 66 | Age 67 | Age 68 | Age 69 | Age 70 |
| 1943-1954 | 75% | 80% | 86.7% | 93.3% | 100% | 108% | 116% | 124% | 132% |
| 1955 | 74.2% | 79.2% | 85.6% | 92.2% | 98.9% | 106.7% | 114.7% | 122.7% | 130.7% |
| 1956 | 73.3% | 78.3% | 84.4% | 91.1% | 97.8% | 105.3% | 113.3% | 121.3% | 129.3% |
| 1957 | 72.5% | 77.5% | 83.3% | 90% | 96.7% | 104% | 112% | 120% | 128% |
| 1958 | 71.7% | 76.7% | 82.2% | 88.9% | 95.6% | 102.7% | 110.7% | 118.7% | 126.7% |
| 1959 | 70.8% | 75.8% | 81.1% | 87.8% | 94.4% | 101.3% | 109.3% | 117.3% | 125.3% |
| 1960 or later | 70% | 75% | 80% | 86.7% | 93.3% | 100% | 108% | 116% | 124% |
Data source: Social Security Administration.
What age do retired workers claim their Social Security benefit?
The key takeaway from the claiming-age discussion is that waiting equates to a larger monthly Social Security check. However, SSA claims data shows that most retirees aren't willing to be patient.
Every year, the SSA releases an annual statistical supplement that digs below the surface and provides detailed data on where the program's benefit dollars end up. This statistical supplement also looks back at retired-worker claims over the previous year (in this instance, 2021) to show what age retired workers are taking their benefits.
In 2021, nearly 3.2 million retired workers began receiving their monthly Social Security check. Here's the percentage breakdown of the ages at which these retirees chose to file their claim. Note, these percentages exclude the 453,994 workers whose disability benefits automatically converted to retired-worker benefits at full retirement age, which was 66 years and 10 months in 2021:
- Age 62: 29.3%
- Age 63: 7.4%
- Age 64: 8%
- Age 65: 12.7%
- Age 66: 24.7%
- Age 67: 3.9%
- Age 68: 2.3%
- Age 69: 2.1%
- Age 70 (or above): 9.6%
As you can see, the most popular claiming age is the one that results in the largest permanent reduction to monthly benefits. Claiming at age 62 can reduce monthly benefits by up to 30% for persons born in 1960 or later. As a whole, at least 57.4% of claimants took their benefit prior to reaching their full retirement age in 2021.
Conversely, only around a fifth of all claimants (those claiming at age 67 or above) were guaranteed to receive more than the 100% they were due at full retirement age.
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Statistically speaking, these are the best and worst ages to claim Social Security benefits
The big question is: Which claimants are making the smartest decision?
While the answer is a bit complicated given that we (thankfully) don't know our expiration date, studies have shown that certain ages more commonly result in an optimal claim -- "optimal" in the sense that it results in the claimant receiving the highest lifetime benefits from Social Security. Note the emphasis on "lifetime," which may or may not mean maximizing monthly benefits.
In 2019, online wealth management and financial planning company United Income released the results of a study where it extrapolated the claiming decisions of approximately 20,000 people using data from Michigan's Health and Retirement Study. In other words, United Income analyzed whether the claims people made maximized their lifetime benefits from the program.
The result of United Income's efforts was an almost perfectly inverse relationship between actual claims and optimal claims. Whereas a lot of retirees began taking their payout at age 62 or 63, just 6.5% of total claims in the first two years of eligibility proved optimal.
Meanwhile, United Income found that 57% of claimants would have been best served waiting until age 70 to take their payout. Ages 67 and 69 (in that order) were No. 2 and No. 3 in terms of best claiming age for optimal benefits.
Admittedly, everyone's financial, marital, and health situation is going to be unique. There is no such thing as a one-size-fits-all formula when it comes to claiming Social Security benefits. However, the data pretty clearly shows that waiting is going to be beneficial for a majority of retired workers. It's something to keep in mind if you're among the 80% to 90% of workers who'll eventually rely on their Social Security income, in some capacity, to make ends meet.
