For more than two decades, national pollster Gallup has been surveying retirees to gauge their reliance on America's top retirement program, Social Security. Over that span, between 80% and 90% of polled seniors have noted that they lean on their monthly Social Security benefit, in some capacity, to make ends meet.
Gallup's surveys intimate that a majority of future retirees are likely to be in the same boat. In other words, getting as much out of Social Security as possible is going to be a necessity to ensure the financial well-being of future retirees -- and this includes baby boomers!
But in order to maximize what you'll receive from Social Security, you'll first need to understand the factors that can influence your monthly benefit -- including those that may not be readily apparent.
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The ins and outs of how monthly Social Security benefits are calculated
In October, the nearly 50 million retired workers who received a Social Security check took home an average of $1,843.96. Though there are a number of elements that can affect how much of your payout you'll get to keep, including the taxation of benefits at the federal level (and in 12 states), four factors are used by the Social Security Administration (SSA) to determine how much retired workers will receive each month:
- Work history
- Earnings history
- Full retirement age
- Claiming age
As you may have guessed from the first two components, the more you earn over the course of your lifetime, the higher your monthly Social Security check is likely to be during retirement. The SSA takes your 35 highest-earning, inflation-adjusted years into account when calculating your monthly benefit, with a $0 averaged in for every year less of 35 worked.
The third factor, full retirement age, takes into account something that none of us has any control over: our birth year. Your full retirement age represents the age you're eligible to receive 100% of your retired-worker benefit. For baby boomers, full retirement age is either 66, 67, or perhaps somewhere in-between for eligible beneficiaries born from 1955 through 1959.
The fourth factor, and the one that can notably alter what you'll receive each month, as well as during your lifetime, is your claiming age. Although retired workers can begin receiving a monthly Social Security check as early as age 62, the program encourages retirees to be patient. This "encouragement" comes in the form of an up to 8% annual increase in monthly benefits for retired workers willing to wait to claim their payout, beginning at age 62 and continuing through age 69.
As you can see from the table below, taking your benefit prior to reaching full retirement age means accepting a potentially sizable permanent reduction. On the other hand, waiting until after full retirement age to pull the trigger will permanently lift your monthly payout above what you'd have received at full retirement age.
| 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: The Social Security Administration. Table by author.
Patience has historically paid off for most retired workers
One of the biggest challenges for eligible workers is deciding when to claim their Social Security benefit. Based on the average retired-worker benefit of $1,843.96 in October, the hypothetical difference between claiming at age 62 and age 70 is almost $1,000 per month.
What makes an optimal Social Security claim so difficult is that we (thankfully!) don't know our "departure" date. Without this vital piece of information, there's no guarantee we're making the best claim decision.
While there's always going to be some guesswork involved, a comprehensive study on retired-worker claiming decisions suggests patience is often the key to getting the most out of Social Security.
In 2019, online financial planning company United Income released the results of a study that analyzed the claiming decisions of 20,000 retired workers using the University of Michigan's Health and Retirement Study. The goal of this analysis was to determine if retirees made an optimal choice -- i.e., one that generated the highest lifetime income for the individual.
The highlight of United Income's study was the finding that actual claims and optimal claims were inverses of one another. Whereas most of the 20,000 claimants began receiving their Social Security benefit prior to reaching full retirement age, and thus accepted a permanent reduction to their monthly payout, the vast majority of optimal claims occurred at or after full retirement age.
All told, 57% of claimants would have made an optimal choice by taking their Social Security check at age 70. In fact, more than 8 out of 10 of the 20,000 claims studied would have been optimal at or after age 67. By comparison, only 8% of retired workers would have made an optimal claim at ages 62 through 64.
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This under-the-radar Social Security do-over clause can be a financial lifesaver for baby boomers
As of December 2022, 64% of the program's retired workers were receiving a permanently reduced monthly benefit. Early claims have been a common theme for decades with Social Security -- but they don't have to be an end-all for baby boomers.
The little-known Social Security mulligan that baby boomers would be wise to acquaint themselves with is Form SSA-521 (officially known as "Request for Withdrawal of Application"). This predominantly under-the-radar form allows retired workers to withdraw their application for benefits and undo their claim. If the SSA approves this request, it'll be as if you never received benefits in the first place. More importantly, it'll allow your payout to continue accruing at up to 8% annually, through age 69.
Form SSA-521 can come in especially handy for baby boomers who regret taking their payout early. For instance, early filers who reenter the labor force and land a well-paying job may benefit from filing SSA-521 and reversing their claim. Doing so would result in a higher monthly benefit at a future date, as well as a higher statistical probability of more lifetime income from Social Security, as United Income's study showed.
But this under-the-radar Social Security do-over clause does come with a few catches that baby boomers need to be aware of. To start with, it's a one-time mulligan. Eligible retirees don't have the luxury of stopping and starting their monthly payout on more than one occasion.
Secondly, the ability to withdraw benefits is only available to retired workers in the 12 months after their initial claim has been approved. This is to say that if you've been receiving a retired-worker benefit for longer than 12 months, SSA-521 isn't an option available to you.
The third catch is that you'll have to pay back every cent you've received in retired-worker benefits leading up to the approval of SSA-521 by the Social Security Administration. Keep in mind that this also includes any benefits a spouse or children may have received based on your earnings history.
While this little-known Social Security mulligan won't be for everyone, it offers baby boomers a genuine opportunity to reset their claim and fatten up their monthly benefit for a later date.
