For a majority of retirees, Social Security provides an indispensable source of income. A recent update from the Center on Budget and Policy Priorities found that the guaranteed monthly payouts provided by America's top retirement program pull 22.7 million people above the federal poverty line each year, 16.5 million of which are aged 65 and over.
Furthermore, 22 years of annual surveys by national pollster Gallup have shown that 80% to 90% of retirees consistently rely on their monthly Social Security benefit to cover some portion of their expenses.
Long story short, getting the most possible out of Social Security during retirement is going to be imperative for most future retirees. But in order to maximize what you'll receive, you'll first need to understand the basics of how Social Security benefits are calculated, as well as get a firm grasp on how much claiming age can alter average monthly payouts.
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This is the four-point "formula" for calculating your Social Security check
While some aspects of Social Security can be complex or come as a surprise to retired workers -- e.g., depending on your provisional income, there's the potential you'll be taxed on a portion of your benefits -- the Social Security Administration (SSA) uses a straightforward "formula" containing four factors to calculate your monthly Social Security check:
- Work history
- Earnings history
- Full retirement age
- Claiming age
The first two elements -- your work and earnings history -- are joined at the hip. When calculating your monthly Social Security retired-worker benefit, the SSA will account for your 35 highest-earning, inflation-adjusted years. If you want a larger monthly benefit during retirement, generating more in wages and salary during your working years can help achieve that.
However, the SSA also penalizes people who don't work at least 35 years. For every year less of 35 worked, a $0 is averaged into your calculation, which will undoubtedly weigh on your eventual payout.
The third factor, and the only one of the four you have no control over, is your full retirement age (also known as "normal retirement age" by the SSA). This is the age you're eligible to receive 100% of your retirement benefit, and it's entirely determined by the year you're born.
The fourth and final component used by the SSA to calculate your monthly Social Security check -- and the one with the greatest potential to alter your monthly and lifetime benefit -- is your claiming age. Although eligible workers have the option of claiming their benefits as early as age 62, the program strongly incentivizes workers to wait. For every year a worker waits to claim their payout, beginning at age 62 and continuing through age 69, their monthly benefit can increase 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, 67, and 70?
The reason choosing the best claiming age is such a challenge is because there's always going to be some degree of educated guesswork involved. Without knowing our "departure" date, there's no way to know ahead of time if we've made the best possible claiming decision.
With the above being said, ages 62, 67, and 70 are likely to be some of the most-chosen claiming ages in the coming years.
- Age 62: The primary lure of claiming retired-worker benefits at age 62 is getting immediate access to your payout -- even if it means accepting a permanent monthly reduction of up to 30%, depending on your birth year. Additionally, Social Security is contending with an estimated $22.4 trillion (and growing) funding shortfall through 2097, which may lead to sweeping benefit cuts of up to 23% for retired workers by as soon as 2033. Claiming benefits early might be a way for retirees to front-run any potential benefit reductions.
- Age 67: In the years to come, age 67 will likely become the most-popular claiming age for two key reasons. First, it's the full retirement age for anyone born in or after 1960 (i.e., most of today's labor force) and is therefore the target age for anyone wanting 100% of their monthly benefit. Second, workers with disabilities (born in or after 1960) have their payout automatically convert to retired-worker benefits when they hit their full retirement age.
- Age 70: The attraction of waiting eight years, post-eligibility, to claim benefits at age 70 is that it'll maximize what you'll receive each month. Depending on your birth year, you can receive 24% to 32% more than what you would have taken home at full retirement age.
With a better understanding of why future retirees are liable to choose these three claiming ages, let's take a closer look at how much retired-worker beneficiaries are bringing home each month at these ages. Keep in mind that the following average payouts are based on the age of beneficiaries as of December 2023, and aren't necessarily indicative of their claiming age. For example, a 70-year-old retired-worker beneficiary may have claimed their payout anywhere from age 62 through age 70.
According to the SSA's Office of the Actuary, retired-worker beneficiaries who were 62 years old in December 2023 received an average check of $1,298.26. As for 67-year-old retired-worker beneficiaries, the average payout was a more robust $1,883.50. Finally, 70-year-old retired-worker beneficiaries brought home an average of $2,037.54 for the month of December. This means the average age 70 retired worker is enjoying a payout that's 57% higher than what age 62 beneficiaries are receiving.
The million-dollar question is: Does claiming later make more sense?
A comprehensive study published five years ago appears to offer a clear answer for most future retirees.
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Waiting often proves to be advantageous for retired workers
In 2019, researchers at online financial planning company United Income published a study that examined the claiming decisions of 20,000 retired workers using data from the University of Michigan's Health and Retirement Study. The purpose of their analysis was to extrapolate these claims to determine if workers were making "optimal" decisions -- i.e., the decision that resulted in them receiving the highest lifetime (key word!) benefit.
After analyzing 20,000 retired-worker claims, United Income's researchers came to two important conclusions. First, they discovered that very few (only 4%) workers made optimal claiming decisions. As noted, it's impossible to concretely know ahead of time if you're making the best possible choice without knowing your "expiration" date.
But the more important finding was that actual claims and extrapolated optimal claims were inverses of each other. This is to say that while many retirees chose to take their payouts prior to reaching full retirement age, the majority of optimal claims would have occurred at or after full retirement age.
For instance, United Income's study showed that only around 8% of combined claims at ages 62, 63, and 64 would have been optimal. By comparison, 57% of the 20,000 retired workers analyzed would have received the greatest amount of lifetime income had they begun taking benefits at age 70. Although age 67 would have been optimal for around 10% of claimants, it's well behind age 70.
Ultimately, every worker is going to take into account some combination of their financial needs, marital status, and personal health when deciding which age makes the most sense to begin receiving their Social Security payout. For persons with chronic health conditions that can shorten their life spans, or for low-earning spouses wanting to generate income for their households, an early claim may make all the sense in the world.
But taking a step back and looking at this broad-scale study sheds light on the power of patience. For most future retirees, waiting is going to prove advantageous.
