Here's the Average Social Security Benefit for Retired Workers at Ages 62, 66, and 70

Many Americans are woefully underinformed when it comes to Social Security, and I'm not just talking about young people who need not worry about benefits for decades. MassMutual recently reported that 41% of adults aged 55 to 65 failed a basic Social Security quiz, and another 37% barely passed.

That's concerning, because millions of Americans rely heavily on benefits during retirement. In fact, nearly 90% of retired workers consider monthly Social Security checks an essential source of income, according to Gallup. That means knowledge gaps related to the program can have serious financial consequences.

For instance, all else being equal, payouts are much higher when retirees claim Social Security at age 70 rather than age 62. Yet, nearly 25% of newly awarded beneficiaries started Social Security at age 62 in 2022, and less than 10% started at age 70. That pattern exists in previous years as well, and it may be explained by knowledge gaps related to how Social Security benefits are calculated.

Read on to see the average Social Security benefit at different ages, and to learn how claiming age impacts the payout.

Image source: Getty Images.

The average Social Security retired-worker benefit at different ages

The Social Security Administration regularly publishes anonymized benefit data to promote transparency and improve public understanding. The following chart pulls information from a biannual report detailing the average monthly Social Security benefit for retired workers at different ages. The data comes from December 2023.

Data source: Social Security Administration. Note: Benefit amounts have been rounded to the nearest dollar.

Retired workers in older age groups typically receive larger payments. That pattern is primarily due to differences in claiming age, though lifetime income also factors into the benefits forumula.

Readers should focus on the average payment amounts at 62, 66 and 70 because those three ages cover the spectrum of possible outcomes. Specifically, 62 is the earliest possible claiming age, 70 is the latest sensible claiming age, and 66 provides a data point in the middle.

To understand exactly how claiming age affects Social Security benefits, we must first discuss how Social Security benefits are calculated.

Social Security benefits depend on lifetime income and claiming age

The Social Security Administration use a worker's lifetime income and claiming age to calculate their retirement benefit. The arithmetic can be broken into four steps:

• Step 1: Income is adjusted (or indexed) to account for changes in general wage levels (i.e., wage inflation) that occurred during the years a worker was employed.
• Step 2: Adjusted income from the 35 highest-paid years of work are converted to a monthly average known as the average indexed monthly earnings (AIME) amount.
• Step 3: The AIME is run through a formula to find the primary insurance amount (PIA). The PIA is the benefit a worker will get if they claim Social Security at full retirement age (FRA).
• Step 4: The PIA is adjusted for early and delayed retirement. Workers get less than 100% of their PIA if they claim before FRA, and more than 100% of their PIA if they claim after FRA.

There are two caveats to the process described above. First, eligibility for retirement benefits starts at age 62, meaning no one can claim earlier. Second, delayed retirement credits stop accumulating at age 70, meaning it would be nonsensical to claim later.

The following chart shows the correlation between birth year and full retirement age. It also shows the retirement benefit (as a percentage of PIA) workers in each group will receive if they claim Social Security at ages 62 and 70. In other words, the chart shows the smallest possible benefit and the biggest possible benefit for retirees in each group.

Data source: The Social Security Administration.

This chart makes one thing abundantly clear: Claiming age can have a profound impact on Social Security benefits.

Indeed, retired workers born in 1960 or later would get 124% of their PIA if they claimed Social Security at age 70, but the payout would drop to 70% of their PIA if they claimed at age 62. To quote Boston University professor of economics Laurence Kotlikoff, "The benefit is 77% higher, adjusted for inflation, at age 70 than it is at age 62."

To be clear, I am not recommending that every retired worker delay Social Security until age 70. It may be sensible to claim retirement benefits at age 62 in certain situations. However, studies have shown that most people would maximize their lifetime income by delaying retirement benefits until age 70.