Source: Social Security Administration
Roughly 59 million Americans are receiving benefits from Social Security, and those payments represent at least 50% of all retirement income for 52% of married couples.
Because Social Security is such a vital contributor to retiree income, it's little wonder millions of Americans struggle to decide when the time is right to claim Social Security benefits. In 2013, about 2.8 million retired American workers began receiving benefits from the federal program, and you can bet many of them wrestled with the question of when to start. Although everyone's individual situation is different, knowing when the average American begins receiving Social Security benefits can give you a point of reference. So let's go straight to the source and see when your peers are signing up.
When the typical American claims benefits
Every year, the Social Security Administration crunches its data and extracts information regarding the people being served. In 2014, the agency reported that the average man signing up for Social Security did so at age 64.3, while the average woman signed up at age 64.1. In both cases, the average age was younger than the Social Security-defined "full retirement age" of 65 to 67 (depending on the recipient's age of birth), at which point a recipient would receive his or her full benefit.
That's interesting, but the average is skewed by those some recipients who delay taking Social Security for as long as possible in order to increase the size of their monthly checks (more on that in a moment).
In fact, the largest percentage of retirees opted to receive Social Security at age 62 -- the earliest age at which a person can claim benefits. In 2013, 35.7% of men and 41.3% of women signed up at age 62. By comparison, just 1.4% of men and 2.5% of women waited until they were 70 or older to take Social Security.
The following chart shows the breakdown of the average age of Social Security entitlement for men, by year since 1998. You'll notice that 62 is the favored age for claiming Social Security, though fewer men are signing up at that age now than did a decade ago.
Source: Social Security Administration and author's calculations.
This next chart provides the same information as the previous chart, only for women. Similar to men, fewer women are claiming benefits at age 62 now than did in 1998.
Source: Social Security Administration and author's calculations.
What's driving these decisions?
The Social Security Administration's Office of Retirement Policy reported that the percentage of people claiming Social Security at younger ages increased in 2009 due to the Great Recession and that more people claimed Social Security sooner in states with high unemployment rates than in states with low unemployment rates. Since the recession, the percentage of people claiming earlier has resumed its downward slide as jobs and wealth have rebounded.
Setting aside the potential influence of the economy on the decision regarding when to claim Social Security benefits, the debate shifts to whether it's better to start receiving smaller checks earlier or to delay benefits and thereby receive fewer, larger checks.
People who take Social Security prior to full retirement age receive a reduced monthly payment. For example, if your full retirement age is 67 -- meaning you were born after 1960 -- and you start receiving Social Security at age 62, your monthly benefit amount will be about 30% lower than the amount you would receive if you waited until age 67. If your full retirement age is 66 -- meaning you were born between 1943 and 1954 -- and you start receiving Social Security payments at age 62, your monthly payment will be about 25% lower than the amount you would receive if you started receiving benefits at age 66.
Conversely, if you have plenty of retirement savings and can delay taking Social Security until after your full retirement age, your payment amount will increase instead. For example, let's assume your full retirement age is 66 and your full retirement benefit at that point would be $1,000 per month. As the following chart illustrates, taking Social Security at age 62 would result in a monthly payment of $750, but taking Social Security at age 70 would result in a monthly check of $1,320.
Source: Social Security Administration.
Another thing to consider
Deciding when to take Social Security is a personal decision that is likely to be influenced by a number of factors, including your personal retirement savings, whether you will receive any pension income, your health, and the lifestyle you hope to enjoy. Overall, the Social Security Administration reminds us that the total amount of benefits a person will receive over his or her lifetime should ultimately be more or less the same regardless of when they first claim benefits. So those who claim before their full retirement age are not necessarily losing out in the end. Will you follow their lead?
