For most Americans, Social Security income is, to some varied degree, an absolute necessity. In 22 years' worth of annual surveys from national pollster Gallup, no fewer than 80% of retired respondents have stated that they rely on their Social Security check as a "major" or "minor" source of income.
Considering how vital America's top retirement program has been since the first retirement-benefit check was doled out in January 1940, it's important for future retirees to get as much as they can out of Social Security. However, a popular claiming age -- age 62, the earliest age retired-worker benefits can be taken -- may be working against them.
Before digging into the details of the average Social Security benefit at age 62, as well as the pros and cons of an early claim, it's important to first have an understanding of how your Social Security benefit is calculated.
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These four factors are used to calculate your monthly Social Security check
When whittled down to the basics, there are four factors that directly affect retired-worker payouts:
- Work history
- Earnings history
- Full retirement age
- Claiming age
The first two components, your work history and earnings history, are linked. When the Social Security Administration (SSA) calculates your monthly retired-worker benefit, it does so by accounting for your 35 highest-earning, inflation-adjusted years of work. You'll not only want to earn as much as possible, up to the maximum taxable earnings cap, each year, but also work for a minimum of 35 years if you have any hope of maximizing what you'll receive from the program.
The third factor, your full retirement age, is determined by your birth year. It represents the age where you become eligible to receive 100% of your retired-worker benefit. Everyone born in 1960 or after has a full retirement age of 67.
The final factor, and the one that can really swing the pendulum regarding how much you'll receive each month and over your lifetime from Social Security, is your claiming age. Taking your payout prior to reaching your full retirement age will result in a permanent monthly reduction that reaches as high as 30%. Meanwhile, claiming your retired-worker benefit after your full retirement age can add as much as 24% to 32% to your monthly check, depending on your birth year.
The key point is that Social Security encourages patience, and will reward this patience with an up to 8% boost in your monthly check for every year you wait, 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's the average Social Security benefit at age 62?
With a better understanding of how certain factors can affect what you'll receive from Social Security, let's take a closer look at what the earliest filers -- those claiming at age 62 -- can expect.
As you can see in the table above, future retirees taking their benefit at age 62 are accepting a permanent reduction of 30% each month. In turn, they're getting access to their monthly payout years before those future retirees who've chosen to wait and are allowing their monthly benefit to grow. In 2022, nearly a quarter of new retired-worker claims were made at age 62.
Based on data from the SSA, the 565,887 retired workers who were 62 years old and receiving a Social Security benefit as of December 2022 were taking home $1,274.87 per month, or about $15,298 on an annualized basis.
There are typically two reasons why workers choose to take their payout as early as possible. The most logical of these reasons is their personal health. Since the goal should be to generate as much lifetime income as possible from Social Security, people with one or more chronic health conditions that have the potential to shorten life expectancy may benefit from taking their payout early. Admittedly, this is a bit of guesswork, since none of us knows the eventual date of our passing. Nevertheless, personal health tends to play a key role in a number of early claims.
The other reason workers tend to take their benefit early is because of Social Security misconceptions and misunderstandings. For instance, the "2022 Social Security Survey" from Nationwide Retirement Institute in July 2022 found that 70% of surveyed adults aged 26 and older either "strongly agreed" or "somewhat agreed" with the statement: "I worry about the Social Security program running out of funding in my lifetime."
The thing is, Social Security can't go bankrupt or become insolvent given its existing funding mechanisms. It generates 90% of its revenue from the 12.4% payroll tax on earned income (wages and salary, but not investment income), with the remainder coming from the taxation of benefits and the interest it earns on its asset reserves. Whether you're set to retire in a few years or a half-century, Social Security will be there for you.
In other words, misconceptions about the program's solvency appear to be affecting workers' desire to get their hands on their payout.
Image source: Getty Images.
Early filers have the deck stacked against them
Although age 62 has, historically, been an extremely popular age to begin taking Social Security benefits, early filers are facing an uphill battle.
For instance, in addition to having their monthly payout reduced by as much as 30% on a permanent basis, early filers may also be subjected to the retirement earnings test. The retirement earnings test allows the SSA to withhold some, or all, of your benefit depending on how much you earn. Although the retirement earnings test is no longer applicable once someone reaches full retirement age, it can derail plans to collect Social Security income while also continuing to work for some early filers.
Age 62 claimants are giving up quite a bit of income, as well. Whereas the average payout at age 62 was $1,274.87, as of December 2022, retired workers at age 70 were bringing home an average of $1,963.48 per month, or $23,562 per year, according to the SSA. This is a nearly $689 difference each month, working out to over $8,260 more annually for those who chose to wait until age 70 to take their payout.
But perhaps the top evidence that age 62 claimants have the deck stacked against them comes from a study published by online financial planning company United Income in 2019. United Income used data from the University of Michigan's Health and Retirement Study to extrapolate the claims of approximately 20,000 retired workers to determine if they'd made an optimal decision. By "optimal," United Income refers to the claiming decision that gave the individual the highest possible lifetime income from Social Security.
What United Income's study showed is that early claims rarely worked out. On a combined basis, ages 62, 63, and 64 maximized the payouts of only 8% of total claimants studied. By comparison, age 70 would have been the optimal claiming age 57% of the time. In fact, the four best claiming ages with regard to optimal lifetime income from Social Security were, in order, 70, 67, 69, and 68.
While there are instances where an age 62 claim will make sense (say, for health reasons), waiting has the potential to generate far more lifetime income for a majority of retired workers.
