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A comprehensive study of 20,000 retired-worker claims found that the age at which one claims is the most likely to maximize lifetime Social Security benefits.
How To File For Social Security At 62
In October, nearly 50 million retired workers who received Social Security checks took home an average paycheck of $1,843.96. Although this represents a relatively modest monthly benefit, it is responsible for lifting more than 15 million adults age 65 and older out of poverty each year.
Social Security: Those Born From The 11th To The 20th Of Any Month Will Receive Up To $4,873 On January 17
Considering how today’s retired workers rely on their monthly Social Security benefits to cover their expenses, it makes sense to improve what future generations will receive from America’s top retirement plan. But to do so, workers need to understand the ins and outs of how their monthly Social Security check is calculated and how their claims swing can actually change the payout swing.
Although many factors come into play when receiving a Social Security benefit — for example, recipients may be subject to federal and state taxation on their benefits — the Social Security Administration (SSA) uses four basic factors to calculate it. Your Retired Worker Pay:
The first two factors are pretty self-explanatory, but come with a catch. When calculating a worker’s monthly benefit, the SSA takes into account a worker’s 35 highest-earning, inflation-adjusted years. On average, the more you earn over your lifetime, the better chance you have of getting a better Social Security check in retirement. The catch is that if fewer than 35 people work each year, the SSA averages $0 in your calculation. To maximize your benefits from America’s best retirement plan, you must work at least 35 years.
The third component the SSA takes into account when calculating your retired-worker benefit is your full retirement age (FRA), which is determined by the year you were born. Your FRA refers to the point at which you qualify to receive 100% of the retired-employee benefit you are owed. For most of today’s labor force (anyone born in or after 1960), the FRA is 67.
Paying Social Security Taxes On Earnings After Full Retirement Age
The all-important fourth component used to calculate your Social Security benefit is your claiming age. Although benefits can begin as soon as an eligible retired worker reaches age 62, being patient can reap its rewards. Each year an eligible retiree waits to receive their Social Security check after age 62, their benefits will increase by 8% annually through age 69, as shown in the table below.
The chart above will tell you how big the payout differences are depending on the age at which you claim.
For example, a future retiree born after 1960 would accept a permanent reduction of 30% of their monthly pay if they wanted to start receiving their benefits once they became eligible. But workers born after 1960, if they’re willing to wait until age 70, can get a 24% boost above and beyond what they received at FRA. Based on the October 2023 median retiree-worker monthly benefit of $1,843.96, the gap between age 62 and age 70 is nearly $1,000 per month.
However, claiming Social Security benefits is not a cut-and-dried process. Every age group from 62 to 70 years has its positive and negative aspects. But of the range of choices available to prospective retirees, the 62, 65, 67 and 70 years are probably the most popular.
When To Apply For Social Security Benefits
Here’s a brief breakdown of the advantages and disadvantages these four claim ages bring to the table for prospective retirees.
Which of these four ages — 62, 65, 67, or 70 — offers future generations of retirees the best chance to maximize their Social Security withdrawals? A broad-based study published four years ago appears to have the answer.
In 2019, online financial planning firm United Income published a comprehensive study (“The Retirement Solution Hiding in Plain Sight”) that examined the claims outcomes of 20,000 retired workers using data from the University of Michigan’s Health and Retirement Study.
The goal of United Income and its researchers was to determine how these 20,000 claimants fared. More specifically, the results of their Social Security claims were to determine whether they were optimal — that is, generated the highest lifetime income. Understand that peak monthly benefits are not synonymous with high lifetime income.
Social Security: Claiming Benefits At Right Age Requires Analysis
This comprehensive study found a complete inversion between actual retired-worker claims and extrapolated optimal claims. In simple terms, most of the 20,000 claimants examined began receiving their retiree-worker benefits before FRA, while most optimal claims occurred at or after FRA.
United Income’s dataset found that only 8% of all claims between the ages of 62 and 64 are optimal. Age 65 had more or less the same success rate as age 62. Statistically, 62 to 65 year olds (not in this order) offer the lowest probability of an optimal claim in the potential claim age range.
By comparison, 57% of retired workers surveyed would have maxed out their lifetime Social Security income with a claim by age 70. Although 67 is the second most successful age after 70, it would have been the right choice for only 10% of educated retired workers.
Admittedly, not every retired worker can wait until age 70 to receive their Social Security benefits. Factors such as personal health, marital status, and financial needs play a role in determining what age is best to claim.
When Should You Take Social Security
While we can’t know in advance what age is ideal for us — we need to know our “departure” date for that to happen — the latter is statistically more often optimal.
Here’s how average Social Security benefits compare to maximum payments 3 Ways Changing Social Security’s Full Retirement Age Could Make Future Retirees Lose Your Job? Here’s one thing you don’t want to do with your 401(k). Turning 66 this year? Did you know you have reduced Social Security benefits? Why am I maxing out my retirement account even though I don’t want to retire?
Invest better with The Motley Fool. Get stock recommendations, portfolio guidance and more from The Motley Fool’s premium services. MP Dunleavey is an award-winning personal finance journalist and author. For many years he was a cost-of-living columnist for The New York Times, covering real-life finance, behavioral finance and investment issues. She was also the founding editor-in-chief of DailyWorth.com, the first financial e-newsletter for women.
The editors of encyclopedias oversee subject areas in which they have extensive knowledge, whether through years of experience working in that content or studying for an advanced degree. They write new content and proofread and edit content received from contributors.
When To Claim Social Security
Your age when you start taking Social Security has a big impact on how much benefit you get each month. That’s because the Social Security Administration (SSA) pays a different amount depending on whether you start at age 62; At age 67 (that’s full retirement age, or “FRA” for anyone born after 1960); Or at age 70.
You’re not limited to starting Social Security at those three ages — you can start taking benefits any time after age 62 — but they’re important markers to understand.
Remember: Your monthly payout is fixed once you start receiving benefits, although you can expect cost-of-living adjustments (COLAs), which give all payments an annual increase to account for inflation.
Retirement planning revolves around several important milestones. You must be 59 1/2 to withdraw from an IRA or 401(k) without penalty. You must be 65 to apply for Medicaid. The starting age for receiving Social Security retirement benefits is 62 years. But you can also choose to wait.
Claiming Your Social Security
To paraphrase an old adage, when it comes to Social Security benefits, a bird in the hand is worth 30% less than one in the bush.
The benefits you claim at age 62 are considered “reduced” because you receive 30% less than you would if you waited until your full retirement age.
Of course, if you start receiving Social Security, you’ll receive higher monthly payments when you start and when you die. But the longer you wait to get started, the higher each charge will be. So, really, it becomes a question of longevity. How long you expect to live determines your “breakeven age” (more on this below).
Full Retirement Age (FRA) is when the SSA considers you to receive your “full benefits.” This means your benefits are not considered reduced at age 62.
Ask One Senior Place: Knowing When To Start Social Security Depends On Many Factors
The term “full retirement age” is confusing. That doesn’t mean you have to retire completely. It’s not that you’re getting the maximum amount. It kicks in at age
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