Regardless of whether you're retired or just entering the labor force, there's a good chance that Social Security plays a key role in your financial well-being.
For more than two decades, national pollster Gallup has been surveying retirees and non-retirees to gauge their reliance, or expected reliance, on income from America's top retirement program. Between 80% and 90% of retirees have consistently responded that Social Security income is needed, in some capacity, to cover their expenses. Meanwhile, 76% to 88% of future retirees expect to lean on this program to cover at least a portion of their costs during their golden years.
Getting as much as possible out of Social Security is vital to the financial health of America's aging workforce. But in order to do so, retirees first need to understand the nuts and bolts of how their payout is calculated. This includes diving into the importance of claiming age, which can meaningfully alter what beneficiaries will receive on a monthly basis.
Image source: Getty Images.
These four variables are used to calculate your Social Security check
While some aspects of Social Security can be somewhat confusing, the four components the Social Security Administration (SSA) leans on to calculate your monthly check are easy to understand:
- Work history
- Earnings history
- Full retirement age
- Claiming age
These first two factors -- work and earnings history -- are inseparable. When determining how much you'll receive each month, the SSA accounts for your 35 highest-earning, inflation-adjusted years. Take note that the SSA is considering your earned income, which includes wages and salary but not investment income.
Something else to be mindful of is that you'll be penalized for not working at least 35 years. For every year less than 35 worked, a $0 is averaged into your calculation. Thus, if you have any hope of maximizing what you'll net from Social Security during your lifetime, you'll want to work at least 35 years.
The third component is something you have no control over. Your full retirement age is determined by your birth year and represents the age at which you'll receive 100% of your retired-worker benefit. For anyone born in or after 1960 (that's much of today's labor force), the full retirement age is 67.
The fourth and final variable the SSA uses to calculate your Social Security check is your claiming age. Although eligible workers can begin collecting their payout as early as age 62, the program offers a financial incentive to encourage patience. For every year a worker waits to collect their benefit, starting at age 62 and continuing until age 70, their monthly payout can increase by as much as 8%. You can see how this 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.
How much does the average Social Security benefit differ between ages 62 and 67?
Although every age within the traditional claiming range of 62 through 70 has its own unique set of advantages and drawbacks, the two most popular ages to begin collecting benefits moving forward are liable to be 62 and 67. Let's take a brief look at the pros and cons of claiming benefits at these two ages and examine the average difference in Social Security checks that workers can expect.
Age 62: The primary reason workers take their payout at the earliest eligible age is because they don't want to wait to get their hands on their benefit. This extra income can be especially helpful for someone who wants to pay down debt, or who's been struggling to find work.
The other lure of an age 62 claim is the possibility of benefit cuts materializing in less than a decade. According to the 2024 Social Security Board of Trustees Report, the Old-Age and Survivors Insurance Trust Fund (OASI) is nine years away from exhausting its asset reserves. If the OASI's reserves were to be depleted, sweeping benefit cuts of up to 21% may be necessary to sustain payouts through 2098. Collecting benefits as quickly as possible may be perceived as a way to front-run any potential payout reduction.
On the downside, collecting benefits at age 62 ensures a permanent monthly payout reduction ranging from 25% to 30%, depending on your birth year.
What's more, early filers can be exposed to the retirement earnings test. This potential "penalty" allows the SSA to withhold some, or all, of your benefit if you earn above preset income thresholds.
Age 67: What makes age 67 such an attractive claiming age is the fact that it represents the full retirement age for anyone born in or after 1960. Waiting five years, post initial eligibility, before collecting your benefit ensures you'll receive your full payout.
It's also worth noting that Social Security's disability conversion will make age 67 a popular claiming age (by default) moving forward. Workers with disabilities are automatically moved from disability benefits to retired-worker benefits once they reach their full retirement age.
Meanwhile, the biggest drawback to taking your payout at age 67 is the possibility of leaving a lot of Social Security income on the table. If you live well into your 80s, a later claim would likely have resulted in a bigger aggregate payday from America's top retirement program.
According to data from the SSA's Office of the Actuary, nearly 2.92 million age 67 retired-worker beneficiaries received $1,883.50 in December 2023. Comparatively, some 590,000 retired workers took home $1,298.26 at age 62.
Keep in mind that these figures represent the age of retired-worker beneficiaries, as of December 2023, which isn't necessarily indicative of their claiming age (save for age 62). Nevertheless, age 67 recipients are netting an average of $585 more per month than the earliest filers.
Image source: Getty Images.
Waiting often has its rewards
One of the reasons picking the right Social Security claiming age is such a challenge is because we're (thankfully!) lacking a vital piece of information. Without knowing our "expiration" date ahead of time, we'll never concretely know if we've made an optimal claiming choice -- one that's going to maximize what we'll receive during our lifetime.
Since each of us walks a unique path, factors like financial needs, access to retirement plans, personal health, marital status, and taxation all need to be taken into account when deciding which age makes the most sense when collecting Social Security benefits.
With the above being said, researchers at online financial planning company United Income tackled this complicated topic by extrapolating the Social Security claiming decisions of 20,000 retired workers.
Five years ago, United Income released a report ("The Retirement Solution Hiding in Plain Sight") that sought to answer which, if any, claiming age(s) gave retirees the best chance to maximize their lifetime income from Social Security. Although just 4% of the 20,000 retired workers analyzed optimized what they received, the most telling finding was the inverse relationship between actual and optimal claiming ages.
United Income found that 79% of retired worker claims were made from ages 62 through 64. However, only 8% of the 20,000 workers studied would have maximized what they received from Social Security at these three ages.
By comparison, a whopping 57% of the retired-worker beneficiaries examined would have generated the highest lifetime income had they begun collecting their payout at age 70. Interestingly enough, the four ages with the highest probability of optimizing lifetime benefits were (in order) 70, 67, 69, and 68.
To reiterate, this doesn't mean everyone should take their benefit at age 70. Even though the likelihood of maximizing your lifetime payout is fairly low at age 62, an early claim can make complete sense in the right scenario. For instance, if you have a chronic health condition that could meaningfully shorten your life span, an early claim can be a smart move.
But for a majority of future retirees, waiting has its rewards. Even waiting five years following initial eligibility can meaningfully increase what you'll receive on a monthly and lifetime basis from America's top retirement program.
