For most Americans, Social Security represents more than a check. It's a financial foundation that many retirees would struggle to live without.
An analysis conducted by the Center on Budget and Policy Priorities found that Social Security lifted 22.7 million people above the federal poverty line in 2022, 16.5 million of whom were adults aged 65 and above. The simple fact that Social Security exists and provides a guaranteed monthly benefit to eligible retirees has reduced the poverty rate among seniors aged 65 and above from an estimated 38.7% without the program to 10.2% with it.
For most future retirees, maximizing what they'll receive from Social Security is imperative. But in order to do so, they'll first need to understand the nuts and bolts of how their monthly benefit is calculated, as well as gain perspective on the importance of claiming age . Collecting benefits early (age 62), at a middle-ground age (65), or at the tail end of the traditional claiming age range (age 70), can have a myriad of advantages and drawbacks.
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Four variables are used to calculate your monthly Social Security check
Although not every aspect of Social Security is straightforward -- e.g., you might be surprised to learn that a portion of your benefits can be taxed at the federal level, as well as in nine states -- the four variables the Social Security Administration (SSA) uses to calculate your monthly check are easy to understand:
Neither of the first two variables can exist without the other. When determining how much you'll receive each month, the SSA accounts for your 35 highest-earning, inflation-adjusted years. Keep in mind this means wages and salary and excludes investment income.
The quirk to this calculation is that the SSA will penalize beneficiaries who don't have 35 years of qualifying work history. For every year less than 35 worked, $0 is averaged into your calculation. In other words, if you want to maximize what you'll receive from America's leading retirement program, working 35 years, if not longer, is a necessity.
The third factor of importance is your full retirement age, which is the age you become eligible to receive 100% of your retired-worker benefit . Since your full retirement age is determined by the year you're born, it represents the only variable you have no control over.
The fourth and final factor, and the one most responsible for variances in monthly and lifetime benefit collection, is your claiming age. Though retired-worker beneficiaries have the option of taking their payout as early as age 62, there's a financial incentive to be patient . For every year a worker waits to claim their Social Security benefit, beginning at age 62 and continuing through age 69, their monthly check can grow by as much as 8%. You can see how this dynamic plays out in the table below.
| 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.
Collecting benefits at 62, 65, and 70 comes with well-defined advantages and drawbacks
Within the traditional claiming range of 62 through 70, every age offers its own unique, but well-defined, advantages and drawbacks.
But in the years to come, ages 62, 65, and 70, are liable to remain or become especially popular for initial retired-worker claims. Let's take a brief look at the pros and cons associated with each age.
Age 62: The straightforward reason collecting benefits at age 62 is so enticing -- age 62 was the most popular claiming age in 2022 -- is because you don't have to wait to get your hands on your payout.
The other lure of an age 62 claim is the possibility of the Old-Age and Survivors Insurance Trust Fund (OASI) exhausting its asset reserves by 2033. If the OASI were to deplete this excess capital raised since inception, sweeping benefits cuts of up to 21% may be needed for retired-worker and survivor beneficiaries. Collecting benefits early might be perceived as a way to front-run any possible reduction to benefits.
The downside to an age 62 claim, as you may have noticed in the claiming age table, is that monthly benefits are permanently reduced by 25% to 30%, depending on your birth year.
Furthermore, early filers can be exposed to retirement earnings test , which allows the SSA to withhold some or all of your benefits, depending on your earned income.
Age 65: The beauty of the middle-ground claims approach is the ability to minimize how much your monthly benefit will be permanently reduced by waiting just a couple of years. Depending on your birth year, collecting at age 65 would reduce your monthly benefit by 6.7% to 13.3%, which is, on paper, more palatable than a 25% to 30% permanent reduction at age 62.
It's also worth adding that age 65 claimants are still young enough to be able to enjoy their monthly benefit. This is probably one of the reasons age 65 was the third most-popular claiming age in 2022.
On the other hand, taking the middle-ground approach runs the risk of leaving a lot of Social Security income on the table. For instance, if you live well into your 80s, waiting would have resulted in a beefier monthly benefit and substantially higher lifetime income.
Age 70: The undeniable advantage of an age 70 claim is netting the highest monthly benefit possible . Collecting at the tail end of the traditional claims range means receiving 24% to 32% more per month (depending on birth year) than what you'd have been due at your full retirement age.
However, this approach requires patience. You'll have to wait eight years following your initial eligibility before you'll receive a cent. Further, there's no guarantee you'll live long enough to maximize what you'll receive from Social Security, compared to an earlier claiming age.
Now that you have a clearer picture of the advantages and drawbacks -- both on a monthly and lifetime-collection basis -- of these claiming ages, let's return to the all-important topic at hand: Is it better to collect Social Security at 62, 65, or 70?
Although this isn't an easy question to answer, one thorough study offers a concise resolution.
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One claiming age stands head and shoulders above all others
One of reasons claiming age is such a difficult topic to tackle is because it's impossible to know ahead of time if we've made the best possible decision. Since none of us knows when we'll die, there's always going to be some level of educated guesswork involved . This is why there's no perfect Social Security claims blueprint.
The other challenge is that we all walk our own path. Your financial needs, access to retirement plans (individual retirement accounts, 401(k)s, and so on), tax implications, marital status, and personal health are going to be unique to you. This means you'll need to weigh these personal variables, and others I've not mentioned here, when deciding which age makes the most sense to begin collecting your retired-worker benefit.
With these unknowns in mind, the researchers at online financial planning and wealth management company United Income released a report five years ago ("The Retirement Solution Hiding in Plain Sight") that extrapolated the claims of 20,000 retired workers using data from the University of Michigan's Health and Retirement Study. One of the goals was to see how many beneficiaries optimized (i.e., maximized) their lifetime collection from Social Security.
Considering all the unique variables and challenges described above, it's probably not a shock that only 4% of the 20,000 retired workers studied optimized their lifetime payout from Social Security.
However, the far bigger takeaway was the mirror-like inversion between actual and optimal claims.
United Income notes that 79% of the workers studied had begun collecting their payout from ages 62 through 64. Unfortunately, only 8% of optimal claims occurred from 62 through 64. Ages 62 through 65 (not in this order) were the least likely to optimize lifetime benefit collection.
On the other end of the spectrum, collecting at age 70 would have maximized lifetime Social Security benefits for 57% of the 20,000 retirees analyzed .
These findings don't mean there aren't situations where an earlier claim won't make sense. For instance, if you have one or more chronic health conditions that could shorten your life expectancy, or you're a lower-earning spouse and wanting to generate income for the household, an earlier claim may be perfectly reasonable.
But when examining a broader gamut of retired-worker claims, United Income's data pretty conclusively shows that waiting often has its rewards .
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