For most retirees, Social Security is a program they'd struggle to live without. Even though the average retired-worker benefit in February was just $1,910.79, Social Security is responsible for lowering the poverty rate of persons aged 65 and over from an estimated 38.7% without the program to 10.2% with monthly guaranteed payouts, according to a report by the Center on Budget and Policy Priorities.
For most future retirees, this means that getting the most they can out of Social Security is imperative to their financial well-being. But in order to maximize what they'll receive, future generations of retirees first need to be aware of the ins and outs that determine their monthly payout, and understand just how much their claiming age decision can alter their monthly and lifetime benefits.
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Four components are used to calculate your Social Security check
To be fair, some aspects of Social Security can be complex and/or come as a surprise to retired-worker beneficiaries. Examples include the potential to be taxed on a portion of your benefits at the federal level, as well as having some or all of your benefit withheld by the Social Security Administration (SSA) if you claim early and earn more than a preset threshold.
But when it comes to calculating your monthly Social Security check, the four components the SSA relies on are straightforward:
- Earnings history
- Work history
- Full retirement age
- Claiming age
A person's earnings and work history go hand in hand. To determine your monthly Social Security payout, the SSA will take into account your 35 highest-earning, inflation-adjusted years. Although payouts at full retirement age are capped ($3,822 per month in 2024), earning a higher wage or salary (investment income doesn't count) can increase your Social Security benefit.
On the other hand, the program penalizes folks who don't work at least 35 years, regardless of how much they earned in the years they did work. For every year less than 35 worked, the SSA will average a $0 into your calculation.
The third factor -- your full retirement age -- represents the age you're eligible to receive 100% of your retired-worker benefit. It's determined by your birth year, and is thus the only component of the four that you have no control over. For much of today's workforce (those born in or after 1960), the full retirement age is 67.
The fourth component, and the one that can really shift how much you'll receive from Social Security each month and during your lifetime, is your claiming age. While eligible workers can begin receiving their payout as early as age 62, there's a financial incentive to be patient. For every year a worker waits to claim their benefit, beginning at age 62 and continuing through age 69, their monthly check can grow by as much as 8%, as demonstrated 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.
Should you claim benefits at age 62, 65, 67, or 70?
This table also makes it clear just how wide the payout variance can be across the traditional claiming age range of 62 through 70.
For example, taking your retired-worker benefit as soon as possible could result in your monthly payout being permanently reduced by up to 30% for those born in or after 1960. On the other end of the spectrum, waiting until age 70 to claim benefits has the potential to increase your monthly benefit by 24% to 32%, depending on your birth year.
Truth be told, there is no one-size-fits-all blueprint when it comes to claiming age. Every age along the traditional claiming age range offers its own unique set of advantages and drawbacks. But among these claiming ages, a few are likely to be exceptionally popular in the years to come: Ages 62, 65, 67, and 70.
The pros and cons to claiming at these four ages are as follows:
- Age 62: The benefit of taking your payout at age 62 is gaining access to your money as soon as possible. Furthermore, the potential exists for sweeping retired-worker benefit cuts of up to 23% by 2033. Taking your payout early could help front-run a possible payout reduction. On the other hand, claiming at age 62 permanently reduces your monthly check by 25% to 30%, depending on your birth year.
- Age 65: This used to be Social Security's full retirement age for decades. Today it represents a middle-ground age that allows workers to still receive their payout while they're young enough to enjoy it, while also minimizing how much their benefit is permanently reduced each month. On the flipside, payouts are still reduced and recipients could be exposed to those aforementioned early filer penalties.
- Age 67: The reason age 67 may become the most popular of all claiming ages is because it's the full retirement age for persons born in or after 1960. Claiming at age 67 ensures you'll receive your full retired-worker benefit. The downside is that if you live well into your 80s, an age 67 claim may result in you missing out on a lot of Social Security lifetime income.
- Age 70: The clearest advantage of retired workers waiting eight years, post-eligibility, to claim their payout is that they'll receive the largest Social Security check possible, based on their earnings and work history. However, the downside to being patient is that there's no guarantee you'll live long enough to maximize your lifetime benefit from America's top retirement program.
While all four of these claiming ages -- 62, 65, 67, and 70 -- have their advantages, a thorough study conducted five years ago offers up a definitive answer as to which one is optimal.
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One claiming age is far likelier than any other to maximize what you'll receive from Social Security
In 2019, the researchers at online wealth management and financial planning company United Income released a report ("The Retirement Solution Hiding in Plain Sight") that took a deep dive into the claiming-age dilemma.
Using data from the University of Michigan's Health and Retirement Study, researchers analyzed the claiming choices of 20,000 retired workers. The purpose of this examination was to extrapolate these claims to determine whether retirees made an "optimal" choice -- the one that netted the recipient the highest lifetime income.
The study found that just 4% of claimants maximized what they received from Social Security. Since you don't know your "departure" date, all claiming decisions will involve some degree of guesswork, as well as factoring in things you do know, such as your personal health, marital status, and financial needs.
However, the shocking discovery in United Income's all-encompassing study is that actual and optimal claims were inverses of each other. This is to say that while most of the 20,000 claimants began taking their retired-worker benefit prior to reaching full retirement age, the bulk of optimal claims were recognized as being at or after full retirement age by researchers.
For example, the study showed that ages 62, 63, and 64 were optimal on a combined basis for just 8% of claimants. Ages 62 through 65 (not in this order) were the four ages that were least likely to maximize a worker's lifetime benefits.
On the other end of the spectrum, age 67 was optimal for about 10% of claimants, while age 70 would have netted 57% of the 20,000 retired workers the highest lifetime income!
Keep in mind that this doesn't mean waiting until age 70 is going to work for everyone. It may make sense for low-earning spouses to take their benefit early and generate income for their household so their higher-earning spouse's payout can grow over time. People with one or more chronic health conditions that could shorten their lifespan may also benefit from an earlier claim.
But what United Income's study does show is that there's a clear advantage to waiting to claim benefits for most retired workers. Future generations of retirees looking to fortify their financial foundation would be wise to consider waiting longer to claim their Social Security payout.
