Should I get Social Security at age 62, 66, 67, or 70? Comprehensive research provides big clues
In November, 50 million retired workers took home Social Security benefits averaging $1,845. The average retirement benefit may not sound like much, but it helps lift nearly 15.4 million adults age 65 and older out of poverty each year.
Considering that most retirees rely on Social Security benefits to some extent to make ends meet, it is essential that future retirees get as much as possible from America’s best retirement program. But doing so requires future beneficiaries to understand how their benefits are calculated and how their billing decisions may affect the amount they will receive monthly and/or over a lifetime.
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The four-part “method” used to calculate Social Security benefits is:
Although the Social Security program has some interesting features (such as the possibility of a percentage of payments being taxed at the federal level and in 10 states), there are only four factors that the Social Security Administration (SSA) applies. ) When calculating your payment, we consider the following:
The first two “ingredients” are closely related. In theory, the more you earn on average over your lifetime, the higher your potential retirement worker benefits. SSA considers your 35 highest earning years plus the inflation-adjusted years when calculating your retirement check. Keep in mind that if you have fewer than 35 employees each year, SSA will apply a $0 average to your calculations. If you want the opportunity to maximize your benefits from America’s best retirement program, we recommend working for at least 35 years.
The third item, “Full Retirement Age” (FRA), refers to the age at which you can receive 100% of retired worker benefits. This is entirely determined by the year you were born, and most of today’s workforce has an FRA of 67.
The fourth most important factor that the SSA uses to calculate your Social Security check is your claiming age. Eligible beneficiaries can begin receiving retired worker benefits as soon as they turn 62, but the program very clearly incentivizes workers to wait to claim payments. As shown in the table below, payments can increase by up to 8% for each year a worker waits to receive benefits from age 62 to age 69.
| birth year | 62 years old | 63 years old | 64 years old | 65 years old | 66 years old | 67 years old | 68 years old | 69 years old | 70 years old |
| From 1943 to 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% |
| Since 1960 | 70% | 75% | 80% | 86.7% | 93.3% | 100% | 108% | 116% | 124% |
Data source: Social Security Administration.
Should I claim benefits at age 62, 66, 67 or 70?
Assuming FRA pays the average retired worker’s salary of $1,845 mentioned earlier, workers born in 1960 or later who file a claim at age 62 could see a permanent cut of up to 30% per month. Meanwhile, if the same worker files a claim at age 70, he or she could claim 24% more than he or she would have received at FRA. In nominal dollar terms, this eight-year difference in claiming age is approximately: $1,000 per month.
What makes Social Security claims decisions so difficult is that there is no one-size-fits-all blueprint. Everyone’s situation will be unique, so 62-year-olds, 66-year-olds, 67-year-olds and 70-year-olds are all likely to be popular age groups to argue for the option to move forward. Each of these alleged ages has its own pros and cons.
- 62 years old: The beauty of claiming at age 62 is that you can receive benefits as soon as you are eligible. This could be an especially attractive option for people worried about a potential benefit cut after nine years. However, claiming benefits at age 62 could permanently reduce your monthly payments by up to 30% and subject you to a retirement income test, which allows the SSA to withhold some or all of your benefits depending on your income.
- 66 years old: What makes 66 so attractive is that it’s literally in the middle of the traditional billing age range (62-70). If you wait four years to start receiving benefits, the permanent payment reduction may be minimized or eliminated, depending on your year of birth. However, for people born after 1960, payments may be reduced somewhat permanently and beneficiaries may be subject to a retirement income test.
- 67 years old: For the majority of today’s workforce, age 67 represents FRA. Therefore, claiming at age 67 guarantees that you will receive at least 100% of the amount you are owed in retired worker benefits each month. The downside to claiming at 67 is that you’ll have Social Security money left over if you live well into your 80s.
- 70 years old: The key to claiming at age 70 is that you will receive the highest monthly benefit possible (anywhere from 24% to 32% of what you would receive at FRA, depending on your year of birth). The downside is that there is no guarantee that you will live long enough to maximize your lifetime income through the program.
When considering the benefits and advantages for each of these four claiming ages, the most important questions to ask are: Which one offers the best opportunity to maximize lifetime payouts? A comprehensive study published in 2019 appears to provide the following results: giant proviso.
Image source: Getty Images.
Statistically speaking, those who claim their age are better than the rest
Five years ago, online financial planning company United Income published a report (“The Retirement Solution Hiding in Plain Sight”) that used data from the University of Michigan’s Health and Retirement Study to analyze and estimate the claims decisions of 20,000 retired workers.
The researchers’ goal was to determine, in retrospect, whether retired workers made optimal claims decisions. For United Income, “optimal” refers to decisions that maximize the amount a retiree receives over their lifetime, not necessarily on a monthly basis.
United Income’s in-depth investigation found a striking reversal between actual and optimal claims. Although most of the 20,000 retired workers began receiving monthly checks before they reached FRA, an overwhelming percentage of optimal claims would have occurred at or after FRA.
More specifically, extrapolation of claims data showed that only 8% of the 20,000 claims studied were optimal at ages 62, 63, and 64. combined! In fact, the four earliest claiming ages (62 to 65 years) had the lowest overall likelihood of making an optimal claim.
By comparison, researchers at United Income found that 57% of retired workers would have generated the most income in their lifetime if they waited until age 70 to start receiving monthly checks. For those wondering, age 67 had the second highest likelihood of making an optimal claim (about 10%), while age 66 ranked fifth, behind age 70, 67, 69, and 68 (in that order).
Since none of us know the “start” date, we can’t know in advance whether we’ve made the optimal billing choice. The best thing you can do is to consider your personal health, marital status, and financial needs when determining the best age to receive retired worker benefits. This means that for some workers, claiming early may be best.
But when we look at the broad base of former claimants collectively, history shows that waiting will be beneficial for most future retirees.
