For more than eight decades, Social Security has been doling out a monthly benefit to retired workers. While this payout isn’t making any of the program’s beneficiaries rich, it has proved to be a necessity, more often than not, for retirees.
. These polls have found that 80% to 90% of retirees lean on their monthly check, in some capacity, to cover their expenses.
in your inbox every market day.
A separate analysis from the Center on Budget and Policy Priorities found that the poverty rate for adults aged 65 and above would be nearly four times higher if Social Security didn’t exist — 10.2% (as of 2022) with Social Security versus an estimated 38.7% without.
Therefore, getting as much as possible out of Social Security is vital to the financial well-being of most future retirees.
, and what impact an early (age 62), middle-ground (age 67), or late (age 70) collection approach can have on your monthly benefit.
These four components are used to calculate your monthly Social Security check
? — the four factors used by the Social Security Administration (SSA) to calculate your monthly check are straightforward:
Your work and earnings history are two components that are intertwined. The SSA will take into account your 35 highest-earning, inflation-adjusted years when calculating your monthly benefit. If you earn a higher average wage or salary throughout your lifetime (investment income doesn’t count), you’re more likely to receive a beefier monthly benefit during retirement.
But regardless of how much you earn each year, you’ll be penalized if you don’t have at least 35 years of work history. For every year less of 35 worked, the SSA will average a $0 into your calculation. If you believe you’ll need your Social Security check to make ends meet during retirement, you’ll want to work at least 35 years.
. It represents the age you become eligible to receive 100% of your retired-worker benefit, and it’s the only component we can’t control.
. Even though retired-worker benefits can begin as early as age 62, there’s a financial incentive that encourages patience. More specifically, for every year a worker waits to collect their benefit, beginning at age 62 and continuing until age 70, their payout can grow by up to 8%. You can see how this plays out, depending on your full retirement age, in the table.
Data source: Social Security Administration.
What’s the average Social Security benefit at ages 62, 67, and 70?
: 62, 67, and 70.
Let’s briefly dig into the pros and cons of these three claiming ages and take a closer look at what the average beneficiary is respectively taking home each month at 62, 67, and 70.
With a better understanding of the positives and drawbacks of these three claiming ages, let’s examine what the average Social Security benefit is at 62, 67, and 70.
of retired workers, as of December 2023, and isn’t necessarily indicative of the age they began collecting their benefit, except for age 62.
.
From one end of the traditional claiming spectrum to the other, age 70 beneficiaries received, on average, 57% more than the earliest filers.
a superior claiming age for most retirees
Based on this wide variance in monthly payouts, you might be wondering if one or more ages within the traditional collection range gives future retirees a better chance of maximizing what they’ll receive from Social Security. According to a comprehensive statistical analysis, there is.
(key word!) income collection.
when making our claiming decision.
To add, we all have our own unique path we walk toward retirement. Everyone’s combination of financial needs, accessible retirement accounts, marital status, tax implications, personal health, and so on, will differ. Without a one-size-fits-all blueprint, it will lead to some variability in claiming choice.
.
.
To be fair, this doesn’t mean all future retirees should wait until age 70 to begin collecting their payout. For instance, people with one or more chronic health conditions that can shorten their lifespan may have very good reason for collecting at an earlier age.
But based on this extensive statistical analysis, patience is likely to pay off handsomely for a majority of future retirees. It’s something to keep in mind if you expect to rely on Social Security, in any capacity, to make ends meet during retirement.
Social Security bonus most retirees completely overlook
Simply click here to discover how to learn more about these strategies.
View the “Social Security secrets” »
.
