What's popular isn't always going to be the best choice for retired workers.
For most retirees, Social Security doesn't just provide a check each month. America's top retirement program plays a key role in building a financial foundation for the country's aging workforce.
Based on 22 years of annual surveys conducted by national pollster Gallup, between 80% and 90% of then-retired respondents noted they rely on their Social Security income, in some capacity, to make ends meet. Further, a study from the Center on Budget and Policy Priorities estimates that more than 16.5 million adults aged 65 and over are pulled out of poverty every year by Social Security.
In other words, maximizing what you'll receive from Social Security is imperative for most retirees. The prevailing question is: Will an increasingly popular claiming age for future retirees -- age 67 -- be a smart choice?
To answer that question, you'll first need to understand the ins and outs of how Social Security benefits are calculated, be aware of how much the average retired worker is bringing home at age 67, and appreciate how important claiming age is to this equation.
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These four factors are used to calculate your Social Security check
While Social Security offers a number of potential surprises for retirees -- e.g., benefits may be taxable at the federal level and in 10 states, depending on your provisional income -- the "ingredients" used by the Social Security Administration (SSA) to calculate your retired-worker benefit are straightforward:
- Work history.
- Earnings history.
- Full retirement age.
- Claiming age.
Your work history and earnings history are inextricably linked. In determining how much you'll receive each month, the SSA accounts for your 35 highest-earning, inflation-adjusted years. This does mean that if you earned a higher wage or salary throughout your lifetime, you're likely to receive a larger Social Security check during retirement.
But it should also be noted that you'll be penalized for not working for at least 35 years. For every year less than 35 worked, the SSA will average a $0 into your calculation.
The third component, and the only one of the four you have absolutely no control over, is your full retirement age (sometimes referred to as "normal retirement age" by the SSA). This is the age when you're eligible to receive 100% of your retired-worker benefit, and it's entirely determined by your birth year.
The fourth and final factor, and the one that can have the biggest impact on what you'll receive monthly and during your lifetime from America's top retirement program, is your claiming age. Even though eligible beneficiaries can begin taking their payout as early as age 62, the program encourages workers to be patient. For every year you wait to claim your payout, beginning at age 62 and continuing through age 69, your monthly benefit can grow by as much as 8%, 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% |
Data source: Social Security Administration.
What's the average Social Security benefit at age 67?
Based solely on the percentages listed in the table above, you can get an idea of how much monthly benefits can differ based on your claiming age. Whereas an early filer could see their Social Security check permanently reduced by up to 30% each month, the most patient retirees claiming benefits at age 70 can expect a 24% to 32% increase in their payout, above and beyond what they would have received at full retirement age.
You'll also note why age 67 is such a key claiming age -- especially for future retirees. Anyone born in or after 1960 is guaranteed to receive 100% of their retired-worker benefit if they claim at age 67. Let's take a closer look at what the average retired worker can expect to receive at this age.
Based on recently released data from the SSA's Office of the Actuary, the average retired-worker beneficiary aged 67 was bringing home $1,883.50 in December 2023, or about $22,602 on an annualized basis. Take note that the SSA's data is based on the age of the recipient this past December and isn't necessarily indicative of their claiming age.
Nevertheless, this represents a 45% increase over what the average recipient was taking home at age 62 in December and is nearly 8% less than what the average 70-year-old retired-worker beneficiary received.
As noted, age 67 is likely to increase in popularity, given that it represents the full retirement age for much of today's labor force. Waiting five years post-eligibility to ensure you'll receive 100% of your retirement benefit could be an intriguing proposition for a lot of future retirees.
Social Security's disability conversion is another reason the aggregate number of age 67 claims will climb in the years to come. When workers with disabilities reach their full retirement age, they're automatically converted by the SSA to retired-worker benefits. Since anyone born in or after 1960 has a full retirement age of 67, the disability conversion aspect of the program will cause claims at this age to soar.
Image source: Getty Images.
What's popular isn't always the best choice
The all-important question is: Will an age 67 claim help retirees maximize what they'll receive from Social Security during their lifetime?
The concrete answer is that we just don't know. The only way to be certain that our claiming decision is the right one is to know our "departure" date ahead of time. Since none of us knows this, there's always going to be some degree of guesswork involved that takes into consideration our financial needs, marital status, and personal health, among other factors.
With the above being said, an extensive study has been done on the gamut of traditional claiming ages (62 through 70). Researchers found that what's popular may not always be the best choice.
Five years ago, researchers at online financial planning company United Income released a study that examined the claiming decisions of 20,000 retired workers using data from the University of Michigan's Health and Retirement Study. The idea was to extrapolate these claims to determine how many retirees made an optimal decision -- i.e., one that produced the highest lifetime income.
What United Income discovered was an almost perfect inversion of actual claims and optimal claims. Whereas most of the retired workers began receiving their payout prior to reaching their full retirement age, the overwhelming majority of optimal claims occurred at or after full retirement age.
Among the traditional claiming range, age 67 produced the second-highest percentage of optimal claims (around 10%). That compared to ages 62, 63, and 64, which combined for only 8% of all optimal claims. However, age 67 was a very distant second behind age 70, which would have generated the highest lifetime income for a whopping 57% of the 20,000 retired workers studied.
Though there's no doubt an age 67 claim is going to make sense for some future retirees, United Income's study pretty clearly shows that waiting even longer before claiming benefits may be an even smarter and more lucrative decision.
