No social program is more important to the financial well-being of our nation's retired workforce than Social Security. Based on data from the Center on Budget and Policy Priorities, the guaranteed payments provided by Social Security lift 22.7 million people above the poverty line each year, including just over 16.5 million adults aged 65 and over.
Further, more than two decades of annual surveys by Gallup have shown that no fewer than 80% of then-current retirees rely on their monthly Social Security benefit, in some capacity, to make ends meet.
Image source: Getty Images.
Regardless of whether you're just entering the labor force or nearing retirement, there's a good chance Social Security income will help lay a financial foundation as you age. This means it's imperative to get as much as you can out of America's top retirement program. In other words, it means facing the age-old question: Does waiting to take Social Security, say until age 70, make sense?
But before tackling this question and appreciating how important your claiming age can be, you'll first need a better understanding of how your benefit is calculated.
This is the "recipe" used to calculate your Social Security check
To be fair, certain aspects of the Social Security program can be complex or confusing. For instance, a portion of your Social Security benefits may be taxable at the federal level, as well as in 10 states, depending on your provisional income. You might also be subject to a couple of penalties for claiming benefits early.
But when it comes to calculating your monthly Social Security check, the "recipe" used by the Social Security Administration (SSA) is crystal clear and easy to understand. The four "ingredients" needed are your:
- Work history
- Earnings history
- Full retirement age
- Claiming age
With regard to the initial two factors -- work history and earnings history -- the SSA will account for your 35 highest-earning, inflation-adjusted years when calculating your monthly retired-worker benefit. This means if you've earned more, on average, throughout your lifetime, there's a good chance you'll receive a larger Social Security check.
But there's a caveat to the above. You'll note the SSA is using "35 years" of earned income (wages and salary, but not investment income) in its calculation. For every year less of 35 worked, a $0 is averaged into your calculation. If you want to maximize what you'll receive from Social Security, you'll need to work, at minimum, 35 years.
The third "ingredient" is your full retirement age, which is also referred to as "normal retirement age" by the SSA. Your full retirement age represents the age you'll receive 100% of your retired-worker benefit, and it's determined by your birth year. Your full retirement age is the only aspect of your Social Security benefit calculation that you have no control over.
The final piece of the puzzle, and the one variable that can have more impact than any other, is your claiming age. Though eligible workers can begin taking their payout as early as age 62, the program provides a monetary incentive to encourage patience. For every year a person waits to take their benefit, beginning at age 62 and continuing through age 69, their payout can grow by as much as 8%, as the following table demonstrates.
| 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 70?
The table above can really give you a feel for how claiming age changes the dynamic of how much you'll receive and when you'll receive it. For instance, claiming benefits as early as possible can permanently reduce your monthly Social Security check by up to 30%, depending on your birth year.
At the same time, this retirement table also demonstrates the lure of an age 70 claim. Depending on the year you're born, you can maximize your monthly benefit by receiving between 24% and 32% more than you would have netted at full retirement age.
With this information in mind, let's take a closer look at what the average retired-worker beneficiary is taking home each month at age 70. Keep in mind that the data below, published recently by the SSA's Office of the Actuary, is based on the age of the beneficiary in December 2023 and isn't necessarily indicative of the age they claimed their payout. Thus, retired workers receiving benefits at age 70 could have chosen to start their payouts anywhere from age 62 through age 70.
As of December 2023, the average age 70 retired-worker beneficiary received $2,037.54, or $24,450 on an annualized basis, according to the Office of the Actuary. For some context, this is 8% more than age 67 retired-worker beneficiaries are bringing home each month, and a whopping 57% higher than the average benefit check of $1,298.26 for retired-worker beneficiaries at age 62.
There's no question the dangling carrot of an age 70 claim is the ability to maximize what you'll receive each month. However, the potential downside to waiting is that none of us knows our "expiration" date. If you don't live into your mid-80s, an age 70 claim could result in a higher monthly payout but lower lifetime income, when compared to an earlier claim.
The all-important question is: Does an age 70 claim give you the best chance of maximizing what you'll receive from Social Security?
An all-encompassing study appears to offer a clear answer.
Image source: Getty Images.
Patience can pay off handsomely for most future retirees
Five years ago, researchers at online financial planning company United Income released a lengthy report ("The Retirement Solution Hiding in Plain Sight") that examined, among other things, the correlation between actual and optimal claiming ages. In this sense, "optimal" means the claiming age that would have resulted in a retired worker collecting the maximum lifetime income. Understand that maximizing lifetime benefits may not be the same as maximizing monthly benefits.
Using data from the University of Michigan's Health and Retirement Study, researchers at United Income extrapolated the claiming decisions of 20,000 retired workers.
The headline discovery from United Income was that only 4% of the retired-worker claims analyzed proved optimal. Without knowing our "departure" date ahead of time, there's always going to be some degree of guesswork involved with our claiming decision.
But it's what researchers uncovered when they dug a bit deeper that really stands out. Specifically, United Income found that actual claims and optimal claims were inverses of each other. Although most retirees began taking their Social Security benefit prior to reaching full retirement age, just 8% of optimal benefits occurred at ages 62, 63, and 64, combined!
On the other hand, few retired workers chose to wait until age 70 to claim their benefit. However, researchers calculated that 57% of the 20,000 retired-worker claims studied would have been optimal had age 70 been chosen. No other claiming age came remotely close to maximizing benefits quite like age 70.
To be clear, I'm not saying age 70 is going to work for all future retirees. Factors like marital status, personal health, and financial needs should be taken into account when determining the Social Security claiming age that works for you. For someone with one or more chronic health conditions whose life expectancy could be shortened, an early claim can make sense.
But when Social Security claims are examined with a wide lens, patience has the potential to pay off handsomely for a majority of future retirees.
