For most Americans, Social Security plays a key role in fortifying their financial foundation during retirement. More than two decades of annual surveys from Gallup have shown that between 80% and 90% of then-current retirees count on their guaranteed monthly benefit to cover at least some portion of their expenses.

A separate study from the Center on Budget and Policy Priorities found that, as of 2022, Social Security payouts were responsible for pulling approximately 22.7 million people above the federal poverty line, including 16.5 million 65 or older.

Put bluntly, it’s important to get as much as you can out of America’s top retirement program. But to do so, you first need to understand the nuts and bolts of how your benefit is calculated, as well as get a firm grasp on just how much your claiming age can swing the payout pendulum.

Knowing these details can help answer the age-old question of whether or not a middle-ground claiming approach at 66 is a smart choice.

These four components are used to calculate your monthly Social Security check

In some respects, Social Security can be a complex or downright confusing program. As I’ve previously pointed out, it can surprise some folks to learn that a portion of their Social Security benefits can be taxed at the federal level, and possibly in 10 states, depending on their provisional income.

But when it comes to calculating your monthly Social Security check, four simple components are taken into account by the Social Security Administration (SSA):

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

The first of these two items go hand in hand. When calculating what you’ll receive each month in retired-worker benefits, the SSA takes into account your 35 highest-earning, inflation-adjusted years. Keep in mind that only earned income — such as wages and salary, not investment income — count toward this calculation.

And the SSA will average in a $0 for every year fewer than 35 that you’ve worked. If you have any hope of maximizing your monthly and/or lifetime payout, you’ll want to work 35 years at minimum, if not longer.

The third element is your full retirement age, which represents the age you’re eligible to receive 100% of your monthly benefit. Your full retirement age is determined by your birth year and represents the only factor of the four that you can’t control.

The fourth ingredient used to calculate your Social Security check, and the one with the greatest potential to alter your financial future during retirement, is your claiming age. While retired workers can begin receiving their monthly benefit as early as 62, the program strongly encourages future retirees to exercise patience.

For every year workers wait to claim their benefit, their monthly payout can grow by up to 8%, beginning at 62 and continuing through 69, as shown 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%

What’s the average Social Security benefit at age 66?

Based on your claiming decision, your monthly retiree benefit could be permanently reduced by up to 30% if started at 62. On the other hand, an age 70 claim can result in a monthly payout that’s 24% to 32% above and beyond what you would have received at full retirement age, depending on your birth year.

With a better understanding of how fluid your monthly payout can be when these aforementioned variables are changed, it’s time to circle back to the question at hand — whether a middle-ground claim makes sense — and take a closer look at what the average retired worker is bringing home each month at 66.

According to recently released data from the SSA’s Office of the Actuary, the average retired-worker beneficiary at 66 in December 2023 received $1,739.92, or roughly $20,879 on an annualized basis. Understand that this average payout is based on the age of beneficiaries in December 2023 and isn’t necessarily indicative of their claiming age. For instance, age 66 beneficiaries could have claimed benefits anywhere from ages 62 through 66.

For the sake of comparison, retirees at age 66 are taking home 34% more per month than age 62 retired-worker beneficiaries. On the other end of the spectrum, they’re netting about 15% less per month than the $2,037.54 retired-worker beneficiaries at 70 received in December.

Two catalysts have made 66 one of the most-popular ages to begin receiving retired-worker benefits. The first is psychological: It’s the literal midpoint of the traditional claiming range between 62 and 70. It not only allows beneficiaries to avoid a large permanent reduction to their monthly payout, but also allows them to get their hands on their benefits while they’re still young enough to enjoy them.

Second, the disability conversion has played a key role in the popularity of age 66 claims. Workers with disabilities have their monthly check automatically convert to retired-worker benefits once they reach full retirement age. This is age 66 for persons born from 1943 to 1954, while those born between 1955 and 1959 have a staggered full retirement age that lands between 66 and 67.

This exceptionally popular claiming age might be shortchanging retired workers

The all-important question is: Will an age 66 claim help future retirees get the most they can out of Social Security?

The official answer is: We don’t know. It’s impossible to know if you’ve made the best possible claiming choice without knowing your “expiration” date ahead of time. But an all-encompassing study conducted five years ago offers a compelling answer.

In 2019, researchers at online investment management and financial planning company United Income released a report (The Retirement Solution Hiding in Plain Sight) that examined the claiming decisions of 20,000 retired workers using data from the University of Michigan’s Health and Retirement Study. The purpose for United Income was to extrapolate these claims to determine how many retirees made an “optimal” choice — i.e., one that resulted in the highest lifetime income from Social Security.

United Income found that just 4% of the claimants studied made an optimal decision. But what was arguably even more telling was that actual claims and optimal claims were almost perfect inverses of each other. Whereas most of the 20,000 claimants began receiving their Social Security checks prior to reaching full retirement age, United Income’s model found that later claims proved optimal most of the time.

For example, the study showed that only 8% of claims at ages 62, 63, and 64, combined, would have allowed retired workers to get the most out of Social Security. By comparison, age 70 claims would have been optimal for 57% of the 20,000 claims studied.

As for age 66, it landed perfectly in the middle ground of optimal claiming ages. While age 66 claims offered a higher probability of maximizing lifetime benefits than 62 through 65, the four superior ages to optimize lifetime benefits were 70, 67, 69, and 68, in that order.

To be clear, there will be instances where an early claim makes perfect sense. Workers with one or more chronic health conditions that could shorten their life span could benefit from taking their payout well before their full retirement age.

But when the lens is widened and the full spectrum of claiming ages is examined, it becomes easier to see that what’s popular isn’t always what’s best for retirees.