A recent study published by the National Bureau of Economic Research sheds light on the correlation between claiming age and the average Social Security benefits received by retirees in the United States. The study reveals that while the majority of new retirees opt to claim their benefits early, doing so often results in leaving potential income on the table.

According to data from the Social Security Administration, the average monthly benefit for retired workers varies significantly depending on the age at which they choose to claim their benefits. As of December 2023, the average benefit for retirees aged 62 is $1,298 per month, while it rises to $2,038 per month for those who wait until age 70 to claim.

The study underscores that statistically, fewer than 1% of retirees maximize their lifetime income by claiming Social Security before age 66. However, approximately one-quarter of new retirees claim benefits at age 62, with another one-quarter claiming between ages 63 and 65. This suggests that a significant portion of retirees may not be optimizing their Social Security benefits.

Social Security benefits are calculated based on lifetime earnings and claiming age. The primary insurance amount (PIA) is determined using the inflation-adjusted earnings from the 35 highest-paid years of a worker’s career. This PIA serves as the baseline benefit if claimed at full retirement age (FRA), which varies depending on the year of birth.

Workers have the option to claim benefits as early as age 62 or delay until as late as age 70. However, claiming benefits before FRA results in a reduced benefit amount, while delaying beyond FRA can lead to increased benefits through delayed retirement credits.

For instance, a worker born in 1960 with a PIA of $1,000 per month would receive $700 per month (70% of their PIA) if they claim benefits at age 62. In contrast, if they wait until age 70 to claim, they would receive $1,240 per month (124% of their PIA), representing a 77% increase in benefits.

While the decision of when to claim Social Security benefits ultimately depends on individual circumstances and priorities, understanding the impact of claiming age on benefit amounts is crucial for future retirees. By assessing their financial situation and considering factors such as longevity, employment status, and retirement savings, individuals can make informed decisions to optimize their Social Security income in retirement.