Monthly Social Security benefits are often the biggest source of income among retired workers, and those payments tend to become more important over time as assets are depleted from 401(k) plans and other retirement accounts. For that reason, current workers should have a clear understanding of how their future benefit will be calculated.
Read on to learn about the variables that impact Social Security benefits and to see the average retired-worker benefits from age 62 to 70.
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How Social Security retired-worker benefits are calculated
Generally speaking, the Social Security benefit awarded to a retired worker depends on three variables: lifetime earnings, full retirement age (FRA), and claiming age. Below is a detailed explanation of how those variables fit together to influence Social Security income in retirement.
- Lifetime earnings: The Social Security benefits formula considers the inflation-adjusted earnings from the 35 highest-paid years of a worker's career. The output of the formula is the primary insurance amount (PIA), also called the full retirement benefit.
- Full retirement age: Workers are eligible for retirement benefits at age 62, but they will not get their full retirement benefit or PIA unless they claim Social Security at their FRA, which is age 67 for anyone born in 1960 or later.
- Claiming age: Workers who start Social Security before FRA receive a permanently reduced benefit, meaning they get less than 100% of their PIA. Workers who delay Social Security beyond FRA receive a permanently increased benefit, meaning they get more than 100% of their PIA. But delayed retirement credits stop accruing at age 70, so claiming any later is simply leaving money on the table.
Of the three variables, claiming age is arguably the one where workers have the most control, and their decision regarding when to start Social Security can have a profound impact on their retirement income. All else being equal, the retirement benefit paid to a worker born in 1960 would be 77% higher at age 70 as compared to age 62.
The average Social Security retirement benefit by age
The Social Security Administration publishes a snapshot each month detailing the average benefit paid to four major groups: retired workers, spouses, survivors, and disabled workers. For instance, the average monthly retired-worker benefit was $1,840.27 in Aug. 2023.
The Social Security Administration also publishes a more detailed analysis once each year. The latest version of that report, known as the Annual Statistical Supplement, includes age-specific benefit data as of Dec. 2022. The average benefit amounts detailed in the report have undoubtedly changed in the last 10 months, but the statistical supplement is still useful in identifying broad trends.
The chart below shows the average Social Security benefit paid to retired workers between ages 62 and 70 in Dec. 2022. All monthly benefit amounts have been rounded to the nearest dollar.
Chart by author.
The pattern shown in the chart -- that benefits tend to increase with age -- is congruous with the variables discussed in the previous section. Workers who claim Social Security at age 62 receive the largest benefit reduction possible, meaning they get a smaller percentage of their PIA than workers in any other age cohort. So it makes sense that the average retirement benefit at 62 was the lowest of the bunch.
Similarly, workers who delay Social Security until age 70 get the largest benefit increase possible, meaning they get a bigger percentage of their PIA than workers in any other age cohort. Of course, not all workers who turned 70 last year actually claimed benefits in 2022 -- they could have claimed benefits anytime between 62 and 70 -- but some undoubtedly maximized their delayed retirement credits. So it makes sense that the average retirement benefit at 70 was the highest.
That trend will remain constant over time, though fluctuations may occur among the middle cohorts due to variations in the three variables. Case in point: In Dec. 2022, the average retirement benefit at 69 was slightly lower than the average retirement benefit at 67 and 68. There are many possible explanations; perhaps the 69-year-old cohort included more individuals who claimed Social Security early, or perhaps the 69-year-old cohort had slightly lower lifetime earnings.
Regardless, readers should focus on the overarching trend. Generally speaking, the average retired-worker benefit at age 62 will be much lower than the average retired-worker benefit at age 70. That information can help current workers plan for the future.
