Over eighty years, Social Security has provided monthly benefits to those who have retired. Although these payments aren’t enriching anyone, they’ve become essential for many retirees.
For the past 23 consecutive years, Gallup has carried out a survey to assess the degree of reliance retired workers have on their received incomes. Social Security These surveys indicate that between 80% to 90% of retirees depend on their regular monthly payment to help with their living costs.
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An independent study conducted by the Center on Budget and Policy Priorities revealed that without Social Security, the poverty rate among adults aged 65 and older would be approximately four times greater — standing at 10.2% as of 2022 with Social Security compared to an estimated 38.7% if not for Social Security.
Hence, maximizing benefits from Social Security will be crucial for the financial health of most upcoming retirees.
However, to get the most out of your Social Security benefits, you must first grasp how these payments are determined. Only after understanding this will you be able to understand the significance of your declared age , and how choosing to collect at an earlier age (62), a mid-point age (67), or a later age (70) could affect your monthly benefits.
The calculation of your monthly Social Security benefit involves these four elements.
Even though Social Security occasionally has unexpected elements for beneficiaries — were you aware that Social Security benefits may be subject to taxation at the federal level? in addition to nine states The four elements utilized by the Social Security Administration (SSA) to determine your monthly benefit amount are clear-cut:
- Work history
- Earnings history
- Full retirement age
- Claiming age
Your job performance and financial record are closely linked. When determining your monthly payout, the Social Security Administration considers your top 35 years of earnings adjusted for inflation. Earning a higher average wage or salary over your career—note that investment income does not factor in here—increases your chances of getting a larger monthly benefit once you retire.
However, irrespective of your annual income, you will face penalties if your work record falls short of 35 years. The SSA will add zeros for each year below 35 that you haven’t worked when calculating your benefits. To ensure your Social Security payments help cover living expenses after retiring, aim to log at least three decades and five years of employment.
The third factor, known as your full retirement age, is based on the year of your birth It signifies the age at which you qualify to receive your full retired-worker benefit, and this aspect is the sole element beyond our control.
Lastly, but without being of lesser importance, Your stated age can greatly influence the fluctuation of both your monthly and lifetime payout amounts. Although you may start receiving retirement benefits as young as 62 years old, there’s a financial motivation to be more patient. Specifically, each additional year an individual delays claiming their benefits from age 62 through age 70 can increase their payment amount by approximately 8%. The chart illustrates how these increments vary based on when your full retirement age falls.
| 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.
What is the typical Social Security payment amount at age 62, age 67, and age 70?
Even though each year from the standard collection span of 62 to 70 offers distinct pros and cons, Three claimed age groups are expected to become particularly favored moving forward. 62, 67, and 70.
Let’s quickly explore the advantages and disadvantages of filing for benefits at these three different ages, and then examine what the typical recipient receives monthly when they claim at 62, 67, and 70 years old.
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What's the advantage of collecting benefits at age 62? The attraction of receiving benefits at age 62 lies in not needing to hold off before accessing your entitlements. Additionally, there’s the potential for extensive reductions in Social Security benefits by 2033 Receiving your payment immediately could be seen as a strategy to avoid potential decreases.
Conversely, your payment will have a permanent reduction of 25% to 30% once you start receiving benefits at age 62 (the exact percentage depends on your birth year). Furthermore, you might face additional penalties for filing early. like the retirement earnings test This enables the SSA to deduct part or all of your benefits based on your earnings.
- What is the reason for collecting at age 67? This might swiftly turn into the favored claiming age due to the fact that 67 is considered the full retirement age for those born in 1960 or later, which includes a majority of today’s working population. Starting benefits at this age ensures there will be no decrease in your monthly benefit amount. However, the drawback of opting for this age is that should you live well past your eighties, retrospectively speaking, you may end up foregoing substantial Social Security payments.
- What is the purpose of collecting at age 70? Claiming benefits at age 70 ensures that you receive the highest possible monthly payment, increasing it by 24% to 32% compared to what you'd get at your full retirement age, depending on when you were born. However, this strategy doesn’t ensure that you’ll live sufficiently long to fully capitalize on these higher lifetime payouts from Social Security.
Having gained insight into the advantages and disadvantages of these three filing ages, we can now look at the typical Social Security benefits received at age 62, 67, and 70.
Each year, the SSA's Office of the Actuary publishes a detailed analysis outlining the mean monthly assistance for retired workers aged from 62 up to those over 99 . Bear in mind this information is derived from age Of retirees who stopped working as of December 2023, this doesn’t necessarily reflect the age at which they started receiving benefits, unless they were 62 years old.
Given these points, approximately 590,000 residents live in the area. The typical retired worker aged 62 received an average monthly benefit of $1,298.26. In December 2023, approximately 2.92 million retired individuals received payments. mean payment of $1,883.50 upon reaching 67 years old Finally, approximately 3.01 million recipients who have retired are benefiting from this program. saved an average advantage of $2,037.54 upon reaching 70 years old. .
Across the entire range of the conventional claiming spectrum, those who waited until they were 70 years old received, on average, 57% more compared to individuals who started collecting benefits at the earliest opportunity.
Statistically speaking, there is an older supervisor citing typical retirement ages
Given the significant differences in monthly benefits, you may be questioning whether choosing certain ages within the typical claiming window offers future retirees an advantage for optimizing their Social Security income. A thorough statistical study reveals that there indeed is such an optimal age.
In 2019, researchers from United Income published a study, The Overlooked Retirement Plan Right Before Our Eyes , analyzed the claim decisions of 20,000 retirees utilizing data from the University of Michigan’s Health and Retirement Study. The objective was to determine whether any particular age could maximize Social Security benefits. Here, an “optimal” distribution refers to one that would yield the highest benefit amount. lifetime (key word!) income collection.
As one would anticipate, this comprehensive study revealed that merely 4% of the 20,000 retirees analyzed had filed for benefits at the ideal time. Given that our life expectancy is unknown beforehand, there's There will always be some level of uncertainty involved. When reaching our claim determination.
Moreover, each of us follows our distinct journey towards retirement. Our individual mix of financial requirements, available retirement savings options, marital situation, tax consequences, personal well-being, among others factors, can vary greatly from person to person. Given this diversity, there isn’t a single plan that suits everyone, which naturally leads to differences in when and how people decide to claim their benefits.
However, the more important find is the nearly perfect inversion between actual and optimal claims. Although 79% of the 20,000 retired workers began receiving their benefit from ages 62 through 64, Only 8% of the claims in this range were eventually found to be optimal. .
On the flip side, even though just a tiny fraction of retirees delayed claiming their Social Security benefits until they reached age 70, this still occurred. ideal for 57%, which amounts to 20,000 retirees examined .
To be fair, this does not imply that every future retiree needs to wait until they turn 70 before starting to collect benefits. Individuals who suffer from one or more long-term illnesses that could reduce their life expectancy might have valid reasons for opting to receive payments at an earlier age.
However, according to this comprehensive statistical assessment, being patient is likely to yield substantial rewards for most future retirees. This is an important consideration should you anticipate relying on Social Security, in whatever role, to cover your expenses during retirement.
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