Social Security’s earliest retired-worker claiming age appears to be hurting more than it’s helping.
In April, the nearly 51 million retired workers who received a Social Security check took home an average of $1,915.26. While this might not sound like much, Social Security benefits are responsible for pulling 16.5 million adults aged 65 and over out of poverty each year, according to an analysis by the Center on Budget and Policy Priorities.
Furthermore, the 23rd consecutive year of annual surveys by national pollster Gallup found that 88% of questioned retirees lean on their Social Security payout as either a “major” or “minor” source of income, compared to just 11% who didn’t view it as a needed channel of income.
For a majority of future retirees, Social Security income will be a necessity. This means it pays to know how your benefit is calculated, as well as how important your claiming age can be in determining your monthly and/or lifetime benefit collection.
Collecting Social Security benefits as early as possible — age 62 for eligible retired workers — is likely to remain a popular choice. Based on data provided by Social Security’s Annual Statistical Supplement, 27.3% of new claimants in 2022 took their payout at age 62, making it the most popular of all claiming ages within the traditional claiming range of 62 through 70.
However, what’s popular isn’t always what’s best for the pocketbooks of retirees.
These four variables are used to calculate your Social Security check
Before digging into the details of what the average retired-worker beneficiary is taking home at 62, it’s imperative to understand the nuts and bolts of how your Social Security check is calculated by the Social Security Administration (SSA). The SSA relies on four variables when making its calculation:
Work history
Earnings history
Full retirement age
Claiming age
These first two factors, your work and earnings history, go hand in hand. The SSA uses your 35 highest-earning, inflation-adjusted years when determining how much you’ll receive each month from America’s top retirement program. Keep in mind that the SSA is accounting for earned income, which includes wages and salary, but excludes investment income.
Furthermore, the SSA will penalize retirees for not having worked 35 years. For every year less than 35 worked, a $0 is averaged into the calculation.
The third piece of the puzzle is your full retirement age. This is the age you become eligible to receive 100% of your retirement benefit, and it’s wholly determined by your birth year. For much of today’s workforce, who were born in or after 1960, the full retirement age is 67.
The fourth all-important variable is your claiming age. Though eligible retired workers can begin collecting their benefit at age 62, the program incentivizes patience. For every year a worker holds off on claiming their payout, starting at age 62 and continuing through age 69, their monthly check can grow by as much as 8%, as you can see 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.
How much is the average Social Security check at 62?
As you can get a better feel for from this table, there are wide variances in what you’ll receive on a monthly basis that depend on your claiming age and birth year.
What makes age 62 the most popular of all claiming ages is the fact that eligible workers don’t have to wait to get their hands on their benefit. This is to say they can put this cash to work while they’re still young enough to enjoy it.
Additionally, the latest Social Security Board of Trustees Report estimates that the Old-Age and Survivors Insurance Trust Fund, which is responsible for paying benefits each month to retired workers and survivor beneficiaries, is on pace to deplete its asset reserves by 2033. If this excess capital is exhausted, benefits may need to be slashed by 21% to ensure no further need for reductions through 2098. Collecting benefits at 62 is a perceived way to front-run the possibility of benefit cuts.
But taking benefits at the earliest possible age has its potential downsides, too.
For instance, early filers (anyone receiving benefits who has yet to reach their full retirement age) can be subjected to partial or full withholding of their Social Security payout, depending on how much they earn — what’s known as the “retirement earnings test”. In 2024, age 62 recipients can have $1 in benefits withheld for every $2 in earned income above $22,320, which works out to $1,860 per month without penalty.
The bigger disadvantage is what claiming early does to your Social Security check. As you likely noticed from the table above, monthly benefits at age 62 are permanently reduced by 25% to 30%, depending on birth year.
What does a 25% to 30% permanent payout reduction actually look like in terms of nominal dollars? According to a data release from the SSA’s Office of the Actuary, aged 62 retired-worker beneficiaries took home an average of $1,298.26 in December 2023. This works out to just $15,579.12 per month on an annual run-rate basis, which is only $519 above the federal poverty level for a single filer in the U.S. this year.
To put this payout into further context, the $1,298.26 received by the average aged 62 retired-worker beneficiary in December 2023 is 32% below the average take-home benefit for all retired workers of $1,905.31 in that month, per the SSA.
Is collecting Social Security at 62 a smart move?
However, the more important question to tackle isn’t how much Social Security can pay you monthly — it’s what claiming age gives you the best chance to maximize what you’ll receive during your lifetime.
Admittedly, there’s no easy or shortcut answer to the above question. Since none of us knows our date of “departure” ahead of time, the best we can do is take into account personal factors that will aid in our decision-making process. These unique factors include things like our personal health, marital status, and financial needs.
With the understanding that there’s always going to be some educated guesswork involved when claiming your Social Security check, the researchers at United Income did some of the legwork in determining which claiming ages tend to be best when it comes to maximizing lifetime benefit collection.
Relying on data from the University of Michigan’s Health and Retirement Study, United Income’s analysis (“The Retirement Solution Hiding in Plain Sight”) extrapolated the claiming decisions of 20,000 retired workers to determine if they’d made the optimal choice — the one that maximized their lifetime Social Security income.
As expected, just 4% of the retired workers studied received as much as they possibly could from Social Security. This speaks to the educated guesswork involved in the decision-making process.
But what was even more telling was the vast difference between actual and optimal claiming ages. About 79% of claimants began receiving their Social Security check from ages 62 through 64. However, only 8% of these claims ultimately proved optimal. Although 62 wasn’t the worst claiming age, it was in the bottom four among the traditional claiming age range.
On the other end of the spectrum, age 70 would have been optimal for 57% of retired workers, and more than 80% would have maximized their lifetime income from Social Security with a claim made at or after full retirement age.
There will, undoubtedly, be situations where an age 62 claim makes all the sense in the world. For example, if you’re a lower-earning spouse and want to generate household income while the eventual payout for your significant other grows, an early claim can be logical.
Likewise, if you have one or more chronic health conditions that threatens to shorten your lifespan, taking your benefit at 62, even at a reduced monthly payout, can maximize what you’ll receive during your lifetime.
Although an age 62 claim can be a smart move for certain retirees, statistics show that it’s hurting more than helping most retired workers who collect benefits as soon as possible.
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