The retirement security of millions of Americans is dependent on Social Security, the cornerstone retirement program in the United States.
Gallup’s survey data from the past two decades shows that between 80% and 90% of retirees today rely on Social Security income to make ends meet. Because of this reliance, it’s crucial to learn all you can about maximizing your Social Security payments.
In this post, we’ll look at the four main factors that go into calculating your Social Security benefit and discuss the ideal claiming age based on extensive statistical analysis.
The Four Elements of Your Social Security Benefit:
Understanding the four main factors that influence your Social Security payout is essential before digging into the optimal claiming age.
- Earnings history: The more you earn, up to a certain maximum taxable earnings cap, the larger your Social Security benefit.
- Work history: Social Security calculates your monthly payout based on your 35 highest-earning, inflation-adjusted years. Thus, you need a minimum of 35 years of work to maximize your benefit.
- Full retirement age: Your full retirement age varies based on your birth year and represents the age at which you become eligible to receive 100% of your retired-worker benefit.
- Claiming age: You can begin receiving your Social Security benefit as early as age 62, but your monthly payout increases for each year you delay, up to age 70.
The Crucial Decision: Age 62, 66, or 70?
Your health, marital status, and financial condition are just a few of the variables to consider when deciding when to start receiving your Social Security payment. Let’s look at the pros and cons of filing at 62, 66, and 70 years old:
| 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% |
- Age 62: Making an early claim at age 62 gives you access to your money sooner, which might be helpful if you have a chronic health condition that reduces your life expectancy. However, by making this decision, your monthly payout will be permanently lowered by 25% to 30% and you will be subject to the retirement earnings test.
- Age 66: For individuals born in the years following 1955, the full retirement age is 66. To receive nearly 100% of your full retired worker pension, you must wait until you reach this age. But if you live over 80, you may have missed out on some financial opportunities.
- Age 70: There is a 24%-32% boost in payout if you wait to file for benefits until age 70 as opposed to your full retirement age. The trade-off is that you won’t be able to collect for eight more years, which means that your lifetime payout can be reduced if you don’t make it to your 80s.
The Data-Driven Answer
United Income analyzed data from over 20,000 beneficiaries of retired workers to determine the optimum claiming age. The purpose of this research was to determine the age at which one receives the greatest amount of Social Security payments over their lifetime.
The findings were illuminating:
- Only 4% of the 20,000 claims examined were found to be ideal, suggesting that most recipients were not getting every dollar they were entitled to.
- The majority of retirees (57%) found that their lifetime benefits were at their highest around age 70. Only a small fraction of claimants found that 66 was the ideal age, with 62 coming in a close second.
- In descending order, the four best claiming ages were (70), (67), (69), and (68). More than eighty percent of the claims analyzed would have yielded higher lifetime income had the claim been made later.
Factors to Consider
Despite evidence suggesting that claiming at age 70 is the best option for maximizing lifetime benefits, doing so remains difficult. Uncertain life expectancy and false beliefs about the long-term financial viability of Social Security can affect choices.
The best retirement plan is one that takes into account each individual’s unique set of circumstances, such as their financial standing, marital status, and general health.
Even yet, it’s important to recognize that many retirees could have increased their lifetime Social Security income by waiting to collect benefits.