In September, more than 68 million Americans took home a Social Security benefit, including almost 51.5 million retired workers. Even though the average retired-worker check is a modest $1,921.56, this income has proven vital to the financial well-being of retirees.

Based on an analysis from the Center on Budget and Policy Priorities, the poverty rate for adults age 65 and over was 10.2% in 2022. If Social Security didn’t exist, the poverty rate for seniors would climb to an estimated 38.7%.

What’s more, national pollster Gallup has been surveying retirees annually since 2002 to gauge their reliance on Social Security income. According to the responses, between 80% and 90% (including 88% in 2024) lean on their payout, in some capacity, to cover their expenses.

Getting as much as possible out of Social Security is a necessity for most current and future retirees. But in order to do so, you’ll need to understand the ins and outs of how your benefit is calculated, as well as make the most informed decision possible about your claiming age. This way you’ll know whether collecting benefits early (age 62), taking a middle-ground approach (age 66), or patiently waiting (age 70) is the best choice.

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Four variables are used to calculate your monthly Social Security check

Although Social Security may offer a surprise or two for future beneficiaries — e.g., benefits may be taxed at the federal level, as well as in nine states — there’s complete transparency when it comes to how your benefit is calculated. The Social Security Administration (SSA) relies on four variables to determine how much you’ll receive each month:

• Work history
• Earnings history
• Full retirement age
• Claiming age

Your work history and earnings history are tied at the hip. When calculating your monthly Social Security check, the SSA will take into account your 35 highest-earning, inflation-adjusted years. This means if you’ve earned a lot via wages and salary over many decades, you’ll likely receive an above-average monthly benefit during retirement.

The caveat to the above is that the SSA will also penalize you if didn’t spend 35 years in the labor force. For every year less of 35 worked, the SSA will average a $0 into your calculation.

The third factor, your full retirement age, is determined by the year you’re born and represents the age you’re eligible to receive 100% of your monthly benefit. It’s the only variable of the four that you have no control over.

The fourth component, and the one that has the potential to really swing the monthly and lifetime payout pendulum higher or lower, is your claiming age. While eligible retired workers can begin collecting their payout at 62, there’s a very clear monetary incentive to be patient. For every year a worker waits to collect their Social Security check, beginning at age 62 and continuing until age 70, their benefit can climb by up to 8%. You can see how this decision plays out in the table below.

Data source: Social Security Administration.

Collecting benefits at 62, 66, and 70 comes with clear advantages and drawbacks

Despite the monthly payout variances you see above, all nine ages within the traditional claiming-age range of 62 through 70 have clear advantages and drawbacks. Ages 62, 66, and 70 should be among the most-popular for initial collection in the years to come. Let’s take a closer look at the pros and cons associated with claiming at these respective ages.

Age 62: The most attractive aspect of collecting benefits at age 62 is not having to wait to get your hands on your benefit. This is probably why age 62 was the most popular claiming age in 2022 among retired workers.

Additionally, the Social Security Board of Trustees Report has cautioned for four decades that benefit cuts may be coming. The asset reserves for the Old Age and Survivors Insurance Trust Fund (OASI), which dishes out benefits to retired workers and survivors of deceased workers, is expected to be depleted by 2033. If the OASI’s asset reserves are exhausted, sweeping benefit cuts of up to 21% may await. Claiming benefits as early as possible may be viewed as a way to front-run payouts ahead of a possible cut in nine years.

On the other hand, the earliest possible claiming age can expose beneficiaries to a couple of early filer penalties. This includes a permanent 25% to 30% reduction in your monthly benefit, depending on your birth year, as well as potential exposure to the retirement earnings test. This “test” allows the SSA to withhold some or all of your benefit if you earn above preset income thresholds.

Age 66: The popularity of the middle-ground claim approach can’t be denied. Age 66 was the second most popular claiming age for retired workers in 2022, behind only age 62. The beauty of collecting benefits at 66 is it minimizes the permanent monthly payout reduction while also providing income while you’re still young enough to enjoy it.

Conversely, much of today’s workforce (born in or after 1960) has a full retirement age of 67. This means 66-year-old claimants will still be exposed to a slight permanent monthly payout reduction, as well as the retirement earnings test, until they hit their full retirement age.

Furthermore, if you live well into your 80s, there’s a strong likelihood of having left a lot of Social Security income on the table with a middle-ground claim.

Age 70: Meanwhile, the advantage of collecting benefits at 70 has to do with maximizing what you’ll receive on a monthly basis. Depending on your birth year, age 70 claimants will collect 24% to 32% more per month than they would have received at their full retirement age.

On the other hand, you’ll have to wait eight years following your initial eligibility before you’ll receive a penny from Social Security. Even with the highest possible monthly payout, there’s no guarantee you’ll live long enough to maximize your lifetime collection from America’s top retirement program.

Image source: Getty Images.

Statistically, one age is more likely than others to maximize lifetime benefits

With a better understanding of how your benefit is calculated, as well as the ramifications associated with claiming early, in the middle, or waiting, let’s tackle the most important question of all: Is it better to collect Social Security at 62, 66, or 70?

To be fair, there is no concrete answer that will be right 100% of the time. The reason being that we all walk a unique path. Since everyone’s financial needs, access to retirement plans, tax implications, marital status, health, and so on, will be different, this isn’t a one-size-fits-all decision.

Nevertheless, the researchers at online financial planning company United Income released a comprehensive report five years ago that looked at which ages, if any, offered the highest likelihood of maximizing lifetime benefit collection from Social Security.

The report, “The Retirement Solution Hiding in Plain Sight,” examined the claims of 20,000 retired workers using data from the University of Michigan’s Health and Retirement Study to determine which claiming age would have been most optimal — i.e., which claiming age would have maximized an individual’s lifetime benefit collection from Social Security.

Not surprisingly, given the unknowns I alluded to above, United Income found that only 4% of the 20,000 retirees studied had made an optimal claim. Without knowing our “expiration” date ahead of time, there’s always going to be some educated guesswork involved with our claiming decision.

However, the more important finding was the inverse relationship between actual and optimal claims. Whereas 79% of actual retired-worker collection began at ages 62, 63, and 64, only 8% of combined optimal claims occurred within this range.

On the other end of the spectrum, only a very small percentage of claimants began collecting their payout at 70. Yet, United Income found that 57% of the 20,000 retired workers studied would have maximized their lifetime Social Security benefits collected at this age.

For those curious, the probability of maximizing lifetime Social Security income with an age 66 claim was higher than ages 62 through 65 (not in this order), but lower than ages 67 through 70 (also not in this order).

To reiterate, this doesn’t mean waiting is going to be the smartest move for all future retirees. If you have a chronic health condition that can shorten your lifespan, or you’re a considerably lower-earning spouse who wants to generate income for the household while your significant other’s benefit grows over time, an early claim can make plenty of sense.

But on a statistical basis, the data undeniably shows that waiting has its financial perks for a majority of retirees.

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