For many Americans, Social Security income is a necessity. More than two decades of annual surveys from Gallup have shown that between 80% and 90% of retirees rely on their monthly check to cover at least some portion of their expenses.
Furthermore, the Center on Budget and Policy Priorities estimates that poverty rates for adults aged 65 and above have been reduced by nearly 75% (compared to if the program didn't exist) thanks to the guaranteed monthly benefit that Social Security provides eligible workers.
Image source: Getty Images.
Considering how indispensable Social Security is for today's retirees, and will be for future generations of current workers, getting the most you can out of America's top retirement program is critical. The all-important question is: Is an early claiming age, such as age 62, a smart choice?
In order to confidently answer this question, you'll first need to be aware of the factors used to calculate your Social Security benefit, know how much the average retired-worker beneficiary is receiving at age 62, and recognize how much your claiming age decision can swing the payout pendulum.
These four items are used to calculate your Social Security check
Like most government programs, Social Security has its quirks. Examples include the possibility of being taxed on a portion of your benefits, and facing penalties for an early claim.
But when it comes to calculating your benefit, the Social Security Administration (SSA) makes things straightforward. Four items are used to determine your monthly check:
- Earnings history
- Work history
- Full retirement age
- Claiming age
The initial two factors -- earnings history and work history -- are tied to one another. The SSA will take your 35 highest-earning, inflation-adjusted years into account when calculating your monthly benefit. If you've earned a higher wage or salary throughout your lifetime, there's a decent chance this will result in a larger Social Security check during retirement.
One thing to keep in mind is that the SSA will penalize you if you don't have at least 35 years of work history. For every year less than 35 worked, the SSA will average a $0 into your calculation. You'll need to work at least 35 years if you want any chance at maximizing your payout from Social Security. Additionally, working more than 35 years can potentially remove lower-earning, inflation-adjusted years from the equation, leading to a higher monthly check.
The third "ingredient" the SSA uses to calculate your monthly Social Security benefit is your full retirement age, which is also known as your "normal retirement age." This is the age at which you're eligible to receive 100% of your retired-worker benefit, and it's entirely determined by your birth year.
The fourth and final item used to calculate your Social Security check is your claiming age. Of the four factors listed above, it's the one that can ultimately determine if you have a solid financial foundation during retirement.
Though retired-worker beneficiaries can begin receiving their payout as early as age 62, America's top retirement program strongly incentivizes patience. For every year a worker waits to take their payout, their benefit can increase by as much as 8%, beginning at age 62 and continuing through age 69. You can see the power of patience 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?
As you'll note, there's a mammoth difference in monthly payout across the traditional claiming-age range of 62 through 70. While an early filer could see their monthly benefit reduced by as much as 30% (depending on their birth year), a retired worker who sits on their hands for eight years, post-eligibility, can receive 24% to 32% more than they'd be due at their full retirement age (also dependent on their birth year).
But let's get back to the important question at hand: How much does the average retired worker bring home each month at age 62?
According to data released in recent weeks by the SSA's Office of the Actuary, the roughly 590,000 aged 62 retired-worker beneficiaries who received a benefit in December 2023 took home $1,298.26, or $15,579 over the course of one year.
To offer some context, age 62 recipients took home 31% less in December than age 67 retired-worker beneficiaries, and just over 36% less than recipients at age 70. However, keep in mind that the Office of the Actuary's data is based on the age of the recipient, as of December 2023, and isn't necessarily indicative of the age at which they claimed benefits (with the exception of age 62 beneficiaries).
The reason age 62 is such a popular claiming age is because workers don't have to wait to get their hands on their retirement benefits. This can be a particularly popular claiming age for people with chronic health conditions whose life expectancies may be shorter.
Additionally, Social Security's financial woes have made age 62 a common claims choice for retirees. The 2023 Social Security Board of Trustees Report estimated that America's leading retirement program is facing a $22.4 trillion funding shortfall through 2097. What's more, the Old-Age and Survivors Insurance Trust Fund, which is responsible for doling out monthly benefits to retired workers, is forecast to exhaust its asset reserves by 2033. If this excess cash since inception is depleted, sweeping benefit cuts of up to 23% may be necessary to avoid any further reductions through 2097. Claiming benefits at age 62 allows retirees to front-run any potential benefit cuts.
Image source: Getty Images.
Early filers are facing an uphill battle
But is claiming benefits at age 62 a smart choice?
Though it does allow beneficiaries to (potentially) get their hands on their benefit sooner than those who choose to wait, there are also drawbacks. On top of a permanently reduced monthly payout of up to 30%, early filer penalties may apply. Specifically, workers can be exposed to the retirement earnings test, which allows the SSA to withhold some or all of your benefits, based on how much you earn and when you'll reach full retirement age.
Perhaps the bigger concern is what an exhaustive study by the researchers at online financial planning company United Income uncovered concerning retired-worker claiming ages.
Five years ago, United Income released a study ("The Retirement Solution Hiding in Plain Sight") that examined 20,000 retired-worker claims using data from the University of Michigan's Health and Retirement Study. Its goal was to extrapolate these claims to determine how many of these workers made an "optimal" decision -- one that yielded the highest possible lifetime income.
The headline takeaway from United Income's study is that workers rarely make the best choice. Only 4% of the claimants examined walked away with the maximum lifetime payout from America's top retirement program.
But an even more important find was that actual and optimal claims were almost perfect inverses of each other. Whereas a majority of retired workers began receiving their payouts prior to reaching full retirement age, the bulk of optimal claims would have occurred at or after full retirement age.
Across the traditional claiming-age range of 62 through 70, ages 62 through 65 (not in this order) had the lowest success rate of producing optimal claims. Only a combined 8% of claimants aged 62 through 64 maximized their lifetime payouts. In comparison, a whopping 57% of claimants would have maximized what they received if they took their payouts at age 70.
As stated earlier, there are instances where an early filing makes complete sense. People with chronic health conditions, or even a low-earning spouse wanting to generate income for the household while their significant other's payout grows over time, are ideal candidates for an early claim.
While age 62 is bound to remain a popular claiming choice for a variety of reasons, United Income's study makes it clear that being patient is likely to pay off for an overwhelming percentage of future retirees.
