Claiming age has a profound impact on Social Security benefits for retired workers.
The Social Security Administration periodically publishes anonymized benefit data to promote understanding and foster transparency. The information is often slightly outdated when it becomes available, but it still provides useful insights.
For instance, more than 3.4 million retired workers claimed Social Security in 2022. Roughly one-quarter of them started collecting benefits at age 62, making it the most popular claiming age by a wide margin. However, delaying Social Security until age 70 can increase the payout dramatically.
Read on to learn more.
How Social Security benefits for retired workers are calculated
Social Security benefits for retired workers are based on lifetime income and claiming age. Specifically, lifetime income is used to determine the primary insurance amount (PIA), which is the benefit a worker receives if they claim Social Security at full retirement age. The PIA is then adjusted based on claiming age.
Workers that claim Social Security before full retirement age receive less than 100% of their PIA, and workers that claim after full retirement age receive more than 100% of their PIA. There are only two restrictions. First, eligibility for retirement benefits begins at age 62, meaning no one can claim earlier. Second, delayed retirement credits stop accruing at age 70, so it never makes sense to claim later.
The table below shows the relationship between birth year and full retirement age, and it shows the benefit (as a percentage of PIA) retired workers will receive if they claim Social Security at ages 62 and 70. In other words, the table shows the smallest possible benefit and the largest possible benefit for each group.
| BIRTH YEAR | FULL RETIREMENT AGE | BENEFIT AT AGE 62 | BENEFIT AT AGE 70 |
|---|---|---|---|
| 1943-1954 | 66 | 75% | 132% |
| 1955 | 66 and 2 months | 74.2% | 130.6% |
| 1956 | 66 and 4 months | 73.3% | 129.3% |
| 1957 | 66 and 6 months | 72.5% | 128% |
| 1958 | 66 and 8 months | 71.7% | 126.6% |
| 1959 | 66 and 10 months | 70.8% | 125.3% |
| 1960 and later | 67 | 70% | 124% |
DATA SOURCE: SOCIAL SECURITY ADMINISTRATION. TABLE BY AUTHOR.
How the average retired worker can increase their benefit by $1,071 per month
The average PIA for newly awarded retired workers was $1,984 in 2022. Though two years old, that figure is the most recent data available from the Social Security Administration, and it’s still useful when examining the impact of claiming age.
Most retirees that claimed Social Security in 2022 were born between 1952 and 1960. However, we can simplify the scenario by assuming everyone was born in 1960. Remember, retirees born in 1960 or later receive 70% of their PIA at age 62, 100% of their PIA at age 67, and 124% of their PIA at age 70.
By applying those percentages to the average PIA of $1,984, we can identify how much Social Security income the average retiree receives at ages 62, 67, and 70:
- Age 62: $1,389 per month
- Age 67: $1,984 per month
- Age 70: $2,460 per month
As shown above, assuming every new beneficiary in 2022 reached full retirement age at 67, the average retiree could have increased their monthly benefit by $1,071 by claiming Social Security at age 70 rather than age 62. That is equivalent to an additional $12,852 per year.
In reality, that estimate is conservative. I say that because the average PIA tends increase over time due to rising wages and annual cost of living adjustments. For instance, the average PIA was about $1,424 in 2012, meaning the average PIA has increased roughly 3.3% annually over the last decade.
Assuming that pace remains constant, the average PIA would be roughly $2,117 in 2024. In that scenario, the average retiree would receive about $1,482 per month at age 62 and $2,625 per month at age 70. The difference is $1,143 per month, or $13,716 per year.
And here’s another perspective: While the dollar totals change over time, the percentages remain constant. In other words, workers born in 1960 or later receive 124% of their PIA at age 70, but they only receive 70% of their PIA at age 62. That means those workers can increase their benefit by 77% by claiming at age 70 rather than age 62.
