In January, roughly 52 million retired-worker beneficiaries received an average check from Social Security totaling $1,978.77. While this is a relatively modest monthly payout, it's proved vital to helping retirees make ends meet.
A recently updated analysis from the Center on Budget and Policy Priorities found that Social Security lifted 22 million people above the federal poverty line in 2023, including 16.3 million adults aged 65 and over. If Social Security didn't exist, the poverty rate for seniors would be nearly four times higher -- an estimated 37.3% without Social Security, compared to 10.1% including the program.
Additionally, more than two decades of annual surveys from Gallup have shown that between 80% and 90% of retirees, including 88% in April 2024, lean on their Social Security income to cover at least some portion of their expenses.
Image source: Getty Images.
For most of our nation's future retirees, getting as much as possible out of Social Security isn't a luxury, it's a practical necessity. But in order to maximize what you'll receive from America's leading retirement program, you'll first need to understand the ins-and-outs of how your benefit is calculated. Only then can you appreciate the importance of your Social Security claiming age decision.
Four variables are used to calculate your monthly Social Security check
While Social Security is, admittedly, not the easiest government program to understand, the four variables responsible for determining your monthly Social Security check aren't complicated:
- Earnings history
- Work history
- Full retirement age
- Claiming age
The first two factors are inextricably tied together. When calculating your monthly payout, the Social Security Administration (SSA) will take into account your 35 highest-earning, inflation-adjusted years in the labor force. This includes wages and salary you've earned, but excludes investment income.
To add an asterisk to this step, the SSA will also penalize retirees who didn't spend at least 35 years in the labor force by averaging in a $0 for every year less of 35 worked. If you have any hope of maximizing what you'll receive per month or during your lifetime from Social Security, you'll want to have at least 35 years (if not more) of qualifying work history.
The third item, full retirement age, describes the age you become eligible to initially collect 100% of your retirement benefit. Full retirement age is entirely based on birth year, which makes it the only variable you have no control over.
The fourth variable, and the one known to swing the payout pendulum more than any other, is the all-important claiming age. While retirees have the option of collecting their payout as early as age 62, there's a monetary incentive to be patient. As you can see in the table below, for every year a worker waits to claim their benefit, beginning at age 62 and continuing until age 70, their monthly Social Security check can grow by up to 8%.
| 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.
Statistically, there is a superior claiming age
Every age within the traditional claiming range of 62 through 70 has its own unique set of advantages and drawbacks. For instance, claiming early allows retirees instant access to their benefits. However, it comes with the possibility of early filer penalties, such as the permanent monthly reduction to payouts, as shown in the table above.
Meanwhile, claiming later can be beneficial if you live well into your 80s or beyond. Conversely, there's no guarantee you'll live long enough to ultimately maximize your lifetime payout.
This trade-off between pros and cons begs the question: Is there a superior Social Security claiming age?
Although everyone's claiming variables are unique and there is no one-size-fits-all blueprint to collecting benefits, a comprehensive study has shown that one claiming age, in particular, is superior to others.
In 2019, researchers at United Income released a study (The Retirement Solution Hiding in Plain Sight) that analyzed the Social Security claiming decisions of 20,000 workers using data from the University of Michigan's Health and Retirement Study. The goal was to determine how many retired-worker beneficiaries optimized what they received from the program.
In this sense, an "optimized" claim is one that maximized the amount of lifetime income received from Social Security. Keep in mind that maximizing lifetime collection from Social Security may not be synonymous with the highest possible monthly payout.
Image source: Getty Images.
As you might imagine, very few of the 20,000 retired workers studied (only 4%) made an optimal Social Security claim. Since none of us knows when our time is up, there's always going to be some combination of educated guesswork and luck involved when making our claiming decision.
But what really stood out about United Income's analysis was the well-defined inversion between actual and optimal retired-worker claims.
For example, 79% of the 20,000 retired workers examined began initially collecting their benefit at ages 62, 63, or 64. However, United Income's extrapolation of these ages found that only 8% of collective claims proved optimal from 62 through 64. In short, claiming benefits prior to full retirement age worked out for only a small percentage of workers.
On the other end of the spectrum, there was a decisive winner. A whopping 57% of the 20,000 retired workers analyzed would have optimized their lifetime Social Security income by claiming at age 70.
This finding doesn't mean all future retirees should automatically wait until they're 70 to begin collecting their retirement benefit. For instance, collecting early makes complete sense for retirees with one or more chronic illnesses that could shorten their life expectancy.
But from a statistical standpoint, United Income's study finds that a majority of retired workers would increase the likelihood of maximizing what they'll receive from Social Security by being patient.
