In September, over 68 million Americans received Social Security benefits, including nearly 51.5 million retired workers. Despite the average retired-worker benefit of $1,921.56 being relatively modest, this income has been crucial for the financial stability of retirees. According to the Center on Budget and Policy Priorities, the poverty rate for seniors aged 65 and older was 10.2% in 2022, whereas without Social Security, the rate would rise to an estimated 38.7%.
National pollster Gallup has conducted annual surveys since 2002 to assess retirees’ dependence on Social Security income. Results show that between 80% and 90% of retirees, including 88% in 2024, rely on their benefits to some extent for financial support. To maximize Social Security income, current and future retirees need to understand how benefits are calculated and decide on the optimal claiming age—whether that’s claiming early at 62, taking a middle-ground approach at 66, or waiting until 70.
The Social Security Administration (SSA) calculates monthly benefits using four variables. These are the retiree’s work and earnings history, full retirement age, and claiming age. The SSA considers the highest 35 years of inflation-adjusted earnings when determining monthly benefits, with penalties applied for fewer years. The full retirement age is based on birth year and is beyond individual control. The claiming age can significantly influence the benefits, with those claiming at 62 potentially seeing benefits increase by up to 8% for each year of delay until age 70.
The decision on when to start claiming benefits involves weighing the pros and cons of different claiming ages. At age 62, retirees can access benefits sooner, a popular choice due to concerns about potential future benefit cuts. However, this can result in permanent reductions of 25% to 30%, depending on the birth year, and exposure to the retirement earnings test. At age 66, retirees might benefit from reduced permanent payout cuts and being young enough to enjoy the benefits. Still, many born in or after 1960 have a full retirement age of 67, which exposes them to some reduction and the earnings test until the full retirement age is reached. Meanwhile, claiming at age 70 maximizes monthly benefits but requires waiting eight years from the initial eligibility age, with no guarantee of living long enough to maximize lifetime benefits.
Research has shown statistically that choosing an optimal age is not straightforward, as it varies based on personal circumstances such as health, financial needs, and marital status. A study by United Income examined 20,000 retirees’ claims and found only 4% had made an optimal claim. The data revealed that while 79% of retirees started collecting at ages 62 to 64, only 8% of optimal claims fell within this range. In contrast, despite few retirees claiming at 70, 57% of those studied would have optimized their benefits if they delayed until this age.
The probability of maximizing lifetime benefits at age 66 was higher than for ages 62 to 65 but lower than for ages 67 to 70. While the study supports waiting for most retirees, each situation is unique, and an early claim might be advisable for those with health conditions or lower earners in need of household income. Statistically, however, data suggest that waiting can offer financial advantages for many.
