For most Americans, Social Security represents what is, or will be, an indispensable source of income during retirement. Based on over two decades' worth of annual surveys from national pollster Gallup, as many as 90% of then-current retirees rely on their monthly payout to cover at least some portion of their monthly expenses.
Considering the role Social Security plays in the financial well-being of current and future retirees, getting as much as possible out of America's top retirement program is of the utmost importance. But in order to do so, you'll first need to understand the ins and outs of how your benefit is calculated, as well as how your claiming age can really swing the pendulum for or against you during retirement.
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These four factors are what determine your monthly Social Security check
To be fair, there are a lot of variables that can affect what you'll get to keep from Social Security. For instance, Social Security benefits can be taxed at the federal level, as well as in select states. Early filers could see some or all of their benefits withheld due to the retirement earnings test.
But when dug down to the roots, there are only four factors used to calculate your monthly Social Security check:
- Earnings history
- Work history
- Full retirement age
- Claiming age
The first two pillars, earnings history and work history, go hand in hand. The Social Security Administration (SSA) takes your 35 highest-earning, inflation-adjusted years into account when calculating your monthly benefit. This means if you earn more, on average, throughout your lifetime, you'll likely receive a larger monthly check during retirement. However, the SSA will also average a $0 into your calculation for every year less than 35 worked.
The third component the SSA uses to calculate your monthly Social Security benefit is your full retirement age. This is the age you become eligible to receive 100% of your retired-worker benefit, and it's determined by the year you're born. Anyone born in or after 1960, which includes most of today's labor force, has a full retirement age of 67.
The fourth factor, and the one that can really swing monthly and/or lifetime Social Security benefits higher or lower, is your claiming age. Even though eligible retired workers have the option of taking their payout as soon as they turn 62, the program encourages retirees to be patient. For every year an eligible beneficiary waits to claim their benefit, it can grow by as much as 8%, beginning at age 62 and continuing through age 69, 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. Table by author.
What's the average Social Security benefit at ages 62, 67, and 70?
For most retirees, their health, marital status, and financial needs are going to be some of the key variables that influence their Social Security claiming decision. But when push comes to shove, three claiming ages are likely to be incredibly popular in the years to come: Ages 62, 67, and 70.
Why these three ages?
- Age 62 is the aforementioned earliest age retired workers can access their benefit. Considering that Social Security is facing a $22.4 trillion funding obligation shortfall through 2097, there's the possibility of sweeping benefit cuts for retired workers by 2033. In other words, some beneficiaries may want to front-run potential financial woes for America's top retirement program by taking their payout as early as possible.
- Age 67 is a logical and/or popular claiming choice for two reasons. First, it's the full retirement age for generations of future retirees. To receive 100% of what you're owed, waiting till age 67 makes sense. Second, when workers with disabilities (born in or after 1960) hit their full retirement age, their disability benefits are automatically converted to retired-worker benefits.
- Age 70 will require the most patience (eight years post-eligibility to receive benefits), but it also results in the highest monthly payout. Longevity in the U.S. has increased notably since the first retired-worker benefit was paid in January 1940.
Now that you have a more encompassing idea of why these three claiming ages may grow in importance in the coming years, let's take a closer look at how much beneficiaries are currently taking home each month at these respective ages.
According to data provided by the SSA's Office of the Actuary, 565,887 retired-worker beneficiaries were receiving an average Social Security check in December 2022 of $1,274.87 at age 62. The 2,849,908 retired workers who were age 67 in December 2022 were taking home $1,844.83 per month. Lastly, the 2,955,215 retired workers who were 70 years old in December 2022 were receiving an average of $1,963.48 per month.
Put another way, the average retired-worker benefit for the earliest claimants is 31% below what retired workers took home, on average, at age 67. Meanwhile, the average Social Security check at age 70 is 54% higher than at age 62.
The all-important question is: Does a higher monthly benefit give retirees a better chance to get the most out of Social Security?
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Patience pays off more often than not, according to a comprehensive study
To be clear, there is no such thing as the perfect blueprint when it comes to claiming Social Security benefits. The only way we'd concretely know if we made an ideal claiming choice is if we knew our "departure" date ahead of time. Since we (thankfully!) don't know this, the best we can do is take the variables discussed earlier (health, martial status, and financial needs) into account when making an educated decision.
Nevertheless, a comprehensive study published in 2019 by financial planning company United Income tackled the topic of optimal claiming age(s) and came to a very clear conclusion.
The researchers at United Income examined the previous claims of 20,000 retired workers using the University of Michigan's Health and Retirement Study. The purpose of this study was to extrapolate these 20,000 claims to determine if retirees made an "optimal" decision -- one that produced the highest lifetime income. Note the emphasis I've added to "lifetime," which may not be synonymous with the highest monthly payout.
What United Income's study found was an uphill struggle for early claimants. Only 8% of claims would have been optimal on a combined basis from ages 62 through 64. This is an especially unfortunate finding given that most of the 20,000 retired workers began taking their benefit prior to reaching full retirement age.
In comparison, 57% of claims would have been optimal at age 70. Although age 67 was the second most optimal claiming age, age 70 was around five times more optimal on a percentage basis.
This doesn't mean early claims won't work in certain situations (say, if you have health issues that could shorten your life expectancy). However, United Income's extensive study pretty clearly shows that patience pays off for retired workers far more often than not.
