Social Security has been an essential source of income for retired workers for over 80 years. Although the monthly payout doesn’t make retirees wealthy, it plays a crucial role in ensuring their financial security. For many people, this monthly check is a lifeline during retirement.
According to Gallup’s survey conducted over the past 23 years, between 80% and 90% of retirees depend on Social Security benefits to cover their living costs.
A separate report by the Center on Budget and Policy Priorities highlights that without Social Security, the poverty rate among adults over 65 would nearly quadruple — rising from 10.2% to 38.7%.
Understanding how to maximize your Social Security benefit is vital. To do this, it’s important to know how your monthly benefit is calculated and how different claiming ages impact your payout.
You can claim Social Security as early as age 62, at the age of full retirement (usually 67), or as late as 70. Each age has different financial outcomes, and the amount you receive will depend on the timing of your claim.
How Social Security Benefits Are Calculated?
Social Security benefits are determined by four key factors:
- Work History
- Earnings History
- Full Retirement Age (FRA)
- Claiming Age
Your work history and earnings are essential because Social Security calculates benefits based on your 35 highest-earning years. If you work for fewer than 35 years, the Social Security Administration (SSA) will use $0 for each missing year, which can lower your monthly benefit.
Your Full Retirement Age (FRA) depends on the year you were born. It’s the age when you are eligible to receive 100% of your Social Security benefit. For example, if you were born in 1960 or later, your FRA is 67. This is the age at which you receive the standard benefit amount without any reductions.
Finally, the age at which you start claiming Social Security, known as your Claiming Age, can significantly affect your monthly benefit. If you claim at age 62, you’ll get a reduced amount. But if you wait until age 70, your monthly benefit will increase.
The Impact of Claiming at Different Ages
- Claiming at Age 62: The primary advantage of claiming at 62 is that you don’t have to wait to start receiving benefits. However, this comes with a significant downside: your monthly payment will be reduced by 25% to 30% depending on your birth year. Additionally, if you earn income while receiving Social Security at this age, you may face further reductions under the retirement earnings test, which can withhold part of your benefits.
- Claiming at Age 67: Claiming at age 67 (the full retirement age for most people born after 1960) ensures you don’t face any reduction in your monthly benefit. However, if you wait until age 70, you could receive a significantly higher payout. If you plan to live well into your 80s or beyond, claiming at 67 might not be the best option, as you could lose out on potential extra benefits.
- Claiming at Age 70: Waiting until age 70 to claim Social Security is the best option for maximizing your monthly payout. By waiting, you can increase your monthly benefit by up to 32% compared to claiming at full retirement age. However, there’s no guarantee that you’ll live long enough to fully take advantage of this increase, which makes this option more suitable for those in good health and with a longer life expectancy.
Average Social Security Benefit at Ages 62, 67, and 70
To give you an idea of how much you can expect at these different claiming ages, here are the average monthly benefits for retired workers as of December 2023:
- Age 62: Around 590,000 retired workers received an average benefit of $1,298.26.
- Age 67: Approximately 2.92 million retirees received an average payout of $1,883.50.
- Age 70: About 3.01 million retired workers took home an average benefit of $2,037.54.
As you can see, waiting until age 70 results in a 57% increase in the monthly benefit compared to claiming at age 62.
Which Age is Best for You?
According to a study by United Income, most retirees opt to begin claiming Social Security benefits between ages 62 and 64.
However, only 8% of these claims are considered optimal, meaning they don’t maximize lifetime Social Security income. On the other hand, waiting until age 70 to start claiming is optimal for 57% of retirees.
While waiting until age 70 is optimal for most people, it’s not the right choice for everyone. If you have health issues or other factors that might shorten your lifespan, claiming earlier might be a better option.
Your situation, including health, financial needs, and other retirement savings, should play a major role in your decision.
Conclusion
In conclusion, understanding the impact of when you claim Social Security is crucial to making an informed decision.
If you can afford to wait, claiming at age 70 will maximize your monthly benefit. However, if you need the money earlier, claiming at age 62 or 67 can still provide a steady income stream for retirement.
Make sure to plan carefully and consider all factors, such as your health and financial situation, before choosing your claiming age.
Note: Every piece of content is rigorously reviewed by our team of experienced writers and editors to ensure its accuracy. Our writers use credible sources and adhere to strict fact-checking protocols to verify all claims and data before publication. If an error is identified, we promptly correct it and strive for transparency in all updates, feel free to reach out to us via email. We appreciate your trust and support!
Archer Bannister is a journalist with 4 years of experience covering hard-hitting stories. Currently working with Mikeandjonpodcast, Archer specializes in delivering timely and in-depth updates on a variety of topics, including crime news, politics, and national issues affecting the USA. His expertise and dedication to delivering accurate, impactful news make him a trusted voice for audiences seeking to stay informed on critical topics.
