For the last 23 years, national pollster Gallup has been surveying retired workers to gauge their reliance on Social Security income. For more than two decades, between 80% and 90% of respondents pointed to their Social Security check as being either a "major" or "minor" income source. In other words, the overwhelming majority of retired-worker beneficiaries wouldn't be able to cover their expenses without Social Security.
For future generations of retirees, it's a similar story. Nearly a quarter-century of Gallup surveys show that between 76% and 88% of future retirees, in any given year, anticipate relying on their Social Security payout as a needed source of income.
Getting as much as possible out of the program is imperative to shoring up the financial foundations for future retirees. But in order to do so, they need to understand the nuts-and-bolts of what determines their monthly benefit -- including the all-important claiming age.
Let's take a closer look at the nuts and bolts used to calculate your Social Security check; examine the three most-popular claiming ages, which accounted for 65.1% of all new retired-worker claims in 2022; and see if, based on statistical data, these claimants are making a smart choice.
Image source: Getty Images.
These four elements are used to calculate your Social Security check
Although Social Security isn't the easiest-to-understand program, the four elements used by the Social Security Administration (SSA) to calculate your monthly payout are crystal clear:
- Work history
- Earnings history
- Full retirement age
- Claiming age
The initial two factors, your work and earnings histories, are interwoven. When determining your monthly benefit, the SSA will account for your 35 highest-earning (inflation-adjusted) years. Take note that the SSA is examining your earned income, which equates to wages and salary and doesn't include investment income.
The SSA penalizes those who fail to work at least 35 years. For every year fewer than 35, a $0 is averaged into your calculation, which weighs down your monthly payout.
The third variable, and the one that you have no control over, is your full retirement age. This is the age at which you become eligible to receive 100% of your retirement benefit from Social Security, and it's entirely determined by your birth year. Anyone born in or after 1960 (i.e., much of today's labor force) has a full retirement age of 67.
The fourth element, and the one that can really swing the Social Security income pendulum, is the age you choose to begin collecting benefits. Though retired workers can begin receiving their payout as early as 62, Social Security has a monetary incentive for those who exercise patience.
For every year retirees wait to claim their benefit, beginning at 62 and continuing until 70, their payout can increase by as much as 8%. You can see how this claiming dynamic plays out 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.
Nearly two-thirds of retired-worker beneficiaries are claiming Social Security at these three ages
What makes claiming benefits such a challenge is that none of us knows our personal "expiration" date. Without this key piece of knowledge, there's always going to be some educated guesswork involved when deciding what age is best to begin collecting benefits. The best we can do when making our claim is to take into account important variables, such as our personal health, marital status, financial needs, tax liability, and access to retirement plans.
Despite this uncertainty, millions of eligible retired workers make this decision each year -- and the SSA provides annual statistical supplements that allow us to see when these workers chose to begin receiving their payout.
In 2022, almost two-thirds of the roughly 3.41 million retired workers who began collecting their benefit did so at three ages.
Age 62 (27.3% of new claimants): The most-popular claiming age of all is the initial age of eligibility for retired workers: 62.
Being able to receive your benefit without waiting is what makes a claim at 62 so attractive. Unfortunately, taking benefits at 62 means accepting a permanent reduction to your monthly payout of up to 30%, depending on your birth year. And it might expose you to the retirement earnings test, which allows the SSA to partly or fully withhold benefits, based on your earned income.
The other lure for a claim at 62 is that the Old-Age and Survivors Insurance Trust Fund (OASI) is an estimated nine years away from exhausting its asset reserves. The latest Social Security Board of Trustees Report projects that if the OASI's reserves are depleted, a 21% benefit cut could await retired workers and survivor beneficiaries. Claiming benefits as early as possible is perceived as a way to front-run a potential reduction.
Age 66 (24.7% of new claimants): The second most-popular claiming age in 2022 was 66, with close to a quarter of new retired-worker beneficiaries receiving their payout at this middle-ground of the traditional claiming range. (Note: This 24.7% figure excludes disability conversions at full retirement age).
Age 66 had been the full retirement age for more than a decade. For persons born between 1955 and 1959, their full retirement age lies between 66 and 67. Workers who want to avoid a benefit reduction are compelled to wait until their full retirement age, which is what has made this middle-ground approach so compelling.
Age 65 (13.1% of new claimants): The third most-popular claiming age in 2022, based on data from the SSA, is 65. A little over 13% of new claimants began collecting their payout at this age.
An age 65 claim offers a middle-ground approach that attempts to balance patience with a desire to receive benefits while still young enough to enjoy them. Although it does involve a permanent reduction to your monthly payout, this haircut is substantially smaller than the reduction at age 62.
Image source: Getty Images.
Is collecting Social Security benefits at ages 62, 65, or 66 a smart move?
With a better understanding of what influences your Social Security benefit and what claiming ages are the most popular, let's dig into the most-important question of all: Is collecting benefits at ages 62, 65, or 66 a smart move?
The honest answer is maybe. Since we don't know our date of "departure," there's always going to be some guesswork involved when collecting our benefit.
But based on a study conducted in 2019 by researchers at online financial planning company United Income (entitled The Retirement Solution Hiding in Plain Sight), 62, 65, and 66 don't have the best track records of maximizing lifetime benefit collection.
The researchers at United Income used data from the University of Michigan Health and Retirement Study to extrapolate the claiming decisions of 20,000 retired workers. They aimed to see how many of these workers ultimately made the choice that generated the highest possible lifetime income for their unique situation (i.e., "optimized" benefits).
Unsurprisingly, the study showed that only 4% of the workers examined optimized their lifetime payout.
But the bigger reveal was the almost perfect inversion between actual claiming ages and optimal claiming age. In no particular order, ages 62 through 65 were the four ages that were least likely to have optimized lifetime benefit collection. Meanwhile, 66 sat right in the middle.
On the other end of the spectrum, collecting benefits at age 70 would have been optimal for 57% of the 20,000 retired workers examined. All told, more than 80% of retired workers would have maximized their lifetime Social Security income with a claim made at or after full retirement age.
To be clear, there are situations where an early filing makes all the sense in the world. For example, people with a chronic health condition that can shorten their lifespan can benefit from taking their payout prior to reaching full retirement age.
Likewise, it might be financially smart for lower-earning spouses to claim their payout early in order to allow the benefit of their breadwinning significant others to grow over time.
But when examined as a whole, being patient has statistically been a smarter move for retired workers looking to get as much as they can out of Social Security.
