Have you started qualifying for senior citizens' discounts for anyone 55 and older when buying a cup of coffee? If so, it's time to begin thinking about an important question: When should you claim Social Security benefits?
You might already have an idea about when you'd like to begin receiving Social Security retirement benefits. But it's a good idea to look at the numbers before finalizing your decision. Statistics show these are the best and worst ages to claim Social Security.
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The best age
There's a clear winner when it comes to the best age for most people to collect Social Security retirement benefits. It's 70.
Last year, the National Bureau of Economic Research (NBER) published a working paper focused on when Americans should ideally begin receiving Social Security benefits. In this paper, economists David Altig, Laurence Kotlikoff, and Victor Yifan Ye outline their highly detailed, statistical analysis in arriving at an answer to the question.
They found that for more than 90% of Americans between the ages of 45 and 62, waiting until age 70 to collect Social Security retirement benefits makes the most sense. This shouldn't be surprising. Social Security pays the most to those who delay receiving benefits until they're 70, boosting benefits by 24% above what you'd receive if your full retirement age is 67.
If you don't like this answer, though, you're not alone. Only 10% of Americans who haven't retired yet plan to wait until 70 to receive Social Security benefits, according to the 2023 Schroders U.S. Retirement Survey.
The worst age
So what's the worst age statistically to begin collecting Social Security benefits? Let's first assume that you don't wait until after age 70 to do so, since benefits don't increase after that point. With such an ill-advised move off the table, the NBER analysis again had an unequivocal answer: 62.
Your Social Security benefits will be reduced by 30% if you opt to begin receiving them at age 62 compared to waiting until a full retirement age of 67. Sure, you'll begin collecting those lower benefits early. However, based on actuarial life expectancy, most Americans will live long enough to make more over the long run by waiting.
The NBER analysis found that "virtually all American workers age 45 to 62 should wait beyond age 65" to collect Social Security benefits. To be specific, 99.4% of people are better off at least holding off until after age 65.
But take a guess as to what the second-most popular age for collecting Social Security benefits was last year? Pat yourself on the back if your answer was 62. Nearly 23% of men and 24.5% of women began receiving Social Security retirement benefits at age 62 in 2022. The most popular age to begin collecting benefits was individuals' full retirement age.
The numbers don't lie
In his autobiography, Mark Twain included the phrase, "There are three kinds of lies: Lies, damned lies, and statistics." With all due respect to the great author, in this case, the statistics don't lie. Seventy is the best age to begin receiving Social Security retirement benefits, while 62 is the worst age to do so from a financial perspective.
It's obvious, however, that few Americans take the best path financially, while many take the worst path. A big misconception appears to be a key factor behind this. Schroders' retirement survey found that 44% of respondents plan to begin collecting benefits well before age 70 because they're afraid Social Security will run out of money.
The federal program's trust funds are on course to be depleted in the next decade if no reforms are made. However, ongoing payroll taxes will still be able to fund roughly 75% of benefits. The U.S. Congress could also make changes to Social Security to prevent any benefit cuts.
Perhaps the financial advantages of holding off on collecting Social Security benefits just aren't as important to you as retiring early. Maybe you can't continue working longer for health or other reasons. But for most people, going with the statistically optimal age of 70 to receive Social Security will be the best move financially.
