Whether you’re still working and planning your retirement or already receiving Social Security, knowing your payment amount and how it compares to the average is essential. Your claiming age can significantly affect both your monthly and lifetime payouts, making it crucial to plan carefully.
Social Security
Social Security is a cornerstone of financial security for most Americans in retirement. Surveys by Gallup reveal that between 80% and 90% of current retirees rely on Social Security to cover their expenses. Similarly, 76% to 88% of non-retirees expect to depend on these benefits when they retire. Given this widespread reliance, maximizing your Social Security benefits isn’t just a nice-to-have—it’s a vital part of ensuring financial stability in your later years.
Benefits
To make the most of your Social Security, it’s essential to know the factors that influence your benefit amount:
1. Work History
Your Social Security benefits are based on your 35 highest-earning years. If you haven’t worked for 35 years, zeros are factored into the calculation, which can significantly reduce your benefits. Therefore, working at least 35 years is crucial to maximize your monthly check.
2. Earnings History
The more you earn during your working years, the higher your Social Security benefits will be. The SSA adjusts these earnings for inflation to calculate your average indexed monthly earnings (AIME), which forms the basis of your benefit calculation.
3. Full Retirement Age (FRA)
Your FRA is the age at which you can receive 100% of your Social Security benefits. It varies depending on your birth year, but it generally falls between 66 and 67. While you cannot change your FRA, knowing it is key to making informed decisions about when to start claiming benefits.
4. Claiming Age
Your claiming age is the most critical factor in determining your Social Security benefits. You can start claiming as early as age 62, but your benefits will be permanently reduced. Conversely, if you delay claiming until age 70, your monthly benefits can increase by up to 8% per year.
Social Security Benefits
Here’s how your benefits change based on your birth year and the age you start claiming:
| Birth Year | Age 62 | Age 66 | Age 70 |
|---|---|---|---|
| 1943-1954 | 75% | 100% | 132% |
| 1955 | 74.2% | 98.9% | 130.7% |
| 1956 | 73.3% | 97.8% | 129.3% |
| 1957 | 72.5% | 96.7% | 128% |
| 1958 | 71.7% | 95.6% | 126.7% |
| 1959 | 70.8% | 94.4% | 125.3% |
| 1960 or later | 70% | 93.3% | 124% |
Delaying your claim from 62 to 70 can increase your monthly benefit significantly, but the right choice depends on your financial needs, health, and life expectancy.
Average Social Security Benefits
Knowing how much retirees typically receive at different ages can help you decide when to claim your benefits:
- Age 62: Retirees who claim benefits at 62 receive an average of $1,298.26 per month. This amount is lower because of early claiming penalties.
- Age 66: The average benefit for those claiming at full retirement age (66 for those born between 1943-1954) is $1,739.92.
- Age 70: Retirees who wait until 70 to claim receive an average of $2,037.54 per month, a 57% increase over the average benefit at age 62.
These averages highlight the significant difference in benefits depending on when you start claiming.
Claim
While waiting until age 70 to claim Social Security benefits generally results in the highest monthly payout, it’s not always the best strategy for everyone. Factors like your current financial situation, health, and expected longevity should all play a role in your decision. Some retirees may need the income sooner, while others might benefit from delaying their claim to maximize their benefits.
Deciding when to start claiming Social Security is one of the most important financial decisions you’ll make in retirement. By knowing how your work history, earnings, full retirement age, and claiming age impact your benefits, you can make a more informed decision that aligns with your financial goals. Whether you decide to claim early, at full retirement age, or delay until age 70, knowing the average benefits at each age can help guide your choice.
FAQs
What factors affect my Social Security benefit amount?
Your work history, earnings history, full retirement age, and claiming age.
How does claiming at 62 affect my benefits?
Claiming at 62 reduces your benefits by about 25% to 30%, depending on your birth year.
Is it better to wait until 70 to claim Social Security?
Waiting until 70 maximizes your monthly benefit, increasing it by up to 32% over claiming at full retirement age.
What is the average Social Security benefit at age 66?
The average benefit at age 66 is $1,739.92 per month.
How can I maximize my Social Security benefits?
Work for at least 35 years, earn a high income, know your full retirement age, and consider delaying your claim until 70.