A statistical analysis of 20,000 retiree claims reveals the age most likely to maximize lifetime Social Security income.
In April, about 50.9 million retired beneficiaries took home an average Social Security check of $1,915.26. It may not be a lot of money, but Social Security income has proven essential to retirees’ financial well-being for decades.
For 23 years, the national pollster Gallup has surveyed retirees to assess their dependence on the income they receive from America’s best retirement program. As many as 80% of respondents in any given year indicated it was a “major” or “minor” source of income. By 2024, only 11% of retirees reported not needing their Social Security payments to make ends meet.
Getting the most out of Social Security will be essential for future beneficiaries. But in order to maximize Social Security benefits, future retirees must first understand the details of how their benefits are calculated.
Additionally, they will need to understand how important it can be to claim age. This can make all the difference in determining whether an early claim (age 62), an intermediate approach (age 66), or a waiting game (age 70) is the wisest decision.
Image source: Getty Images.
Four components are used to calculate your monthly Social Security check
Without getting into the nitty-gritty of the formulas (because who wants to do math while reading, right?), the Social Security Administration (SSA) relies on four elements to calculate how much you’ll be paid each month by America. leading retirement program. These four “ingredients” are:
The first two factors, your work history and your income, are inseparable. When calculating your monthly benefit, the SSA will take into account your 35 highest-earning years, adjusted for inflation. This calculation is based on earned income, which includes wages and salaries but excludes investment income.
Additionally, the SSA penalizes beneficiaries who do not work for at least 35 years. For each year of work under age 35, the SSA will contribute an average of $0 in calculating your monthly benefits.
The third variable, your full retirement age, represents the age at which you are entitled to 100% of your retirement benefit. Since it is determined by the year of birth, it is the only element over which you have no control.
The fourth detail that the SSA uses to calculate your monthly Social Security check, and the one I’ve already discussed is the most important, is your age at which you claim your contribution. Although eligible retired workers can begin collecting benefits at age 62, the Social Security program offers a monetary incentive to those willing to wait. For each year a worker waits to receive their compensation, starting at age 62 and continuing through age 70, their benefits can increase by up to 8%. You can see this dynamic playing out in the chart below.
| year of birth | 62 years old | 63 years old | 64 years old | 65 years | 66 years old | 67 years old | 68 years old | 69 years old | 70 years |
| 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.
Receiving benefits at 62, 66 and 70 has very clear advantages and disadvantages
In the traditional age range for applications, which extends from 62 to 70 years, each age has well-defined advantages and disadvantages. However, people aged 62, 66 and 70 are likely to remain popular, if not significantly gain popularity in the years to come. Let’s take a closer look at the pros and cons retirees can expect when choosing to collect benefits at these respective ages.
62 years old: In 2022, age 62 was the most popular age for retirees to begin receiving their Social Security check. The reason is quite simple: retirees don’t want to wait to get their hands on their benefits.
Another reason the earliest possible application age has remained popular is that the Old Age and Survivors Insurance (OASI) Trust Fund, responsible for paying benefits to retired workers and surviving beneficiaries, is expected to exhaust its reserves. assets by 2033. As AVS asset reserves are exhausted, drastic reductions in benefits of up to 21% could follow. Early claimants may be trying to get ahead of any potential reductions in benefits.
However, claiming at age 62 will result in a permanent monthly reduction of 25% to 30%, depending on your year of birth. First-time filers may also be exposed to the Retirement Income Test, which allows the SSA to withhold some or all of your benefits, based on your income.
66 years old: Interestingly, 66 was the second most popular claiming age in 2022. The appeal of the middle-ground approach is that it minimizes or eliminates any reduction in monthly payments, while still allowing retirees to access their payments while they are young enough to benefit from them. .
But there is a potential downside to starting your benefits in the middle of the traditional claims age range. If you live to be 80, you will have left a significant amount of Social Security income on the proverbial table.
70 years : The collecting age limit, as part of the traditional claiming age, has gained popularity over time. Although you will have to wait eight years after your initial eligibility to get your hands on your benefits if you claim at age 70, you will receive the highest monthly payment possible – between 24% and 32% more than what you would have. taken home each month at full retirement age, based on your year of birth.
I will also add that the retirement income test ceases to apply once you reach full retirement age. Thus, 70-year-old claimants do not have to worry about the SSA withholding their retired worker benefits.
The downside of filing at age 70 is the possibility that you won’t live long enough to maximize your lifetime receipt of benefits.
Image source: Getty Images.
Waiting usually has its rewards
With a broader understanding of what each claiming age brings, let’s return to the most important question of all: Is it better to collect Social Security at age 62, 66, or 70?
The real answer is that we don’t actually know. Since none of us know in advance when we are going to “leave,” there will always be some degree of educated guesswork involved in our claims process. We each travel a unique path, which means we will need to consider the factors that matter to us, such as financial need, access to pension plans, marital status, taxes and, of course, health personal.
With this in mind, researchers at United Income conducted a large statistical study five years ago on the age of Social Security claims using data from the Health and Retirement Study of the University of Michigan. Researchers aimed to determine which claim ages were optimized lifetime receipt of benefits (note my emphasis on “for life”).
United Income looked at the claims of 20,000 retirees and found that only 4 percent of them made a choice that ultimately maximized what they received from Social Security. This is not so surprising, given the unknowns associated with receiving Social Security benefits.
What was a surprise was the discrepancy between the actual and optimal claim ages. While 79 percent of the 20,000 retirees studied began receiving their Social Security benefits between ages 62 and 64, only 8 percent of optimal claims were found in that age range.
On the other hand, patience had its rewards. About 57% of retirees surveyed would have maximized their Social Security income if they had received their first benefit at age 70. For what it’s worth, age 66 is right in the middle in terms of maximizing Social Security income (ahead of ages 62 to 65). , but aged 67 to 70).
This is not to say that there are not scenarios in which a prior statement makes sense. For example, a lower-income spouse may choose to collect their Social Security benefits earlier to allow the household’s breadwinner to increase over time. Similarly, a person suffering from one or more chronic health conditions that could shorten their lifespan may benefit from receiving their payment early.
But when you broaden the perspective and look at the collective group of former retirees as a whole, patience more often than not proves to be a statistically wiser choice. This is something that future generations of retirees need to keep in mind when making this very important decision.