Whether you realize it or not, Social Security is an essential source of income for most retirees. It's responsible for pulling roughly 21.7 million people out of poverty each year, including almost 15.4 million adults aged 65 and above. If America's top retirement program didn't exist, the senior poverty rate would be an estimated 38%, as compared to 10% with Social Security (as of March 2022), according to the Center on Budget and Policy Priorities.
Given how critical this program is and will be to respective current and future retirees, it's important to maximize what you'll receive. But in order to do so, you'll first need to have a solid understanding of how your benefit is calculated, as well as how your claiming age can drastically impact this calculation.
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These are the four "ingredients" used to calculate your monthly Social Security benefit
Although there are some quirks that accompany Social Security benefits -- e.g., select recipients can be subjected to federal and/or state-level taxation on a portion of the benefits they receive -- the four "ingredients" used to calculate your monthly retired worker check are straightforward:
- Work history
- Earnings history
- Full retirement age
- Claiming age
The initial two factors, work history and earnings history, are intertwined. When the Social Security Administration (SSA) calculates your monthly Social Security check, they're going to take into account your 35 highest-earning, inflation-adjusted years. This means if you earn more, on average, during your lifetime, your benefit during retirement will, in all likelihood, be higher. It also means you'll be penalized if you don't work for at least 35 years, with the SSA averaging a $0 into your calculation for every year less than 35 worked.
The third "ingredient" is your full retirement age. This is the age you become eligible to receive 100% of your retirement benefit, and it's entirely determined by the year you're born. For anyone born in or after 1960 (i.e., most of today's labor force), the full retirement age is 67.
The fourth component that's especially critical to this "recipe" is your claiming age. Eligible workers can begin receiving their Social Security check as early as age 62. However, the program incentivizes patience. For every year an eligible beneficiary waits to take their payout, beginning at age 62 and continuing through age 69, their monthly benefit can grow by as much as 8%, 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 ages 62, 66, and 70?
What the above table makes crystal clear is that there's a potentially wide variance in payouts based on when a retired worker claims their benefit. But in spite of these nominal-dollar payout differences, a few claiming ages stand out as being particularly popular for retired workers: Ages 62, 66, and 70.
Why ages 62, 66, and 70?
- Age 62: The lure of an age 62 claim is being able to get your hands on your benefit as soon as possible. For retirees concerned about a potential benefit cut being less than 10 years away, an early claim might be palatable.
- Age 66: The popularity of an age 66 claim primarily has to do with it being the midpoint of the traditional claiming age range (62 through 70). Waiting four years to take benefits can reduce or eliminate any permanent payout reduction (depending on your birth year) while also allowing beneficiaries to receive their payout while they're young enough to enjoy it.
- Age 70: The clear advantage of claiming your benefit at age 70 is the ability to maximize what you'll receive on a monthly basis. Depending on your birth year, an age 70 claim can boost your monthly payout by between 24% and 32%, compared to what you'd have received at full retirement age.
Now that you have a better understanding of what might compel retirees to claim their payout at ages 62, 66, and 70, let's take a closer look at how much retired workers are currently bringing home at each respective age. Keep in mind that the data below is based on the age of retired workers as of December 2022 and is not necessarily representative of their claiming age. For instance, age 66 recipients may have claimed their payout anywhere from ages 62 through 66.
Based on data from the SSA's Office of the Actuary, nearly 566,000 aged 62 retired-worker beneficiaries were receiving $1,274.87 as of Dec. 2022. Meanwhile, the average Social Security check for the 2.27 million retired workers at age 66 is $1,719.85. Lastly, the close to 2.96 million retired-worker beneficiaries who were 70 years old in Dec. 2022 were bringing home $1,963.48.
In other words, the average age 66 retired worker is receiving about 35% more per month than those who took their payout at age 62. By comparison, age 70 recipients are netting 54% more per month, on average, than those at age 62.
Image source: Getty Images.
An extensive study reveals which claiming age is often best
There's no denying that claiming age decisions can be challenging. Without knowing the date of your "expiration," there's simply no way to know ahead of time if you've made the best possible choice. For the vast majority of future retirees, some combination of financial needs, marital status, and personal health will be relied on when making their claim.
However, this didn't stop the researchers at online investment management and financial planning company United Income from extensively analyzing Social Security retired-worker claims to determine which age proved to be optimal -- i.e., the age that produced the highest lifetime income for the claimant.
In 2019, United Income's study ("The Retirement Solution Hiding in Plain Sight") analyzed the claims history of 20,000 retired workers using data from the University of Michigan's Health and Retirement Study. What researchers found was a very clear inverse between actual claims history and optimal claims. Whereas most of the retirees examined began receiving their payout prior to reaching full retirement age, a majority of optimal claims occurred at or after full retirement age.
According to this extensive study, only a combined 8% of claimants from ages 62 through 64 would have made an optimal claim. By comparison, 57% of the 20,000 retired workers studied would have maximized their lifetime income from Social Security if they'd waited until age 70 to take their payout. Though age 66 offered a higher probability of optimizing lifetime income than age 62, it fell behind ages 67 through 70 in terms of optimal claim pecking order.
Mind you, this data doesn't mean that early claims don't make sense. For instance, people with chronic health conditions that could shorten their life expectancy are likely to generate more lifetime income from an earlier claim. But when examined as a whole, United Income's study pretty clearly shows patience is a pathway to maximizing lifetime Social Security benefits for a majority of future retirees.
