Retirees can substantially increase their monthly Social Security benefits by waiting until 70 to claim.
Nearly 90% of U.S. retirees depend on Social Security to some degree, and more than 80% of current workers expect to rely on those benefits in retirement, according to Gallup.
So naturally, one of the most common retirement planning questions is: How much money will I get from Social Security? The Social Security Administration says a person’s full retirement benefit will, on average, replace about 40% of their annual pre-retirement income, but the precise amount any person receives will depend on individual circumstances.
A step-by-step explanation of how Social Security benefits are calculated
Social Security benefits for retired workers depend on their earnings and their claiming age.
- Step 1: A worker’s annual earnings are indexed to the national average wage level to account for inflation that occurred during their career.
- Step 2: The indexed earnings from their 35 highest-paid years are converted to a monthly average, appropriately called the average indexed monthly earnings (AIME) amount.
- Step 3: A formula is applied to the AIME to determine the worker’s primary insurance amount (PIA), which is the benefit they qualify for at their full retirement age (FRA).
- Step 4: The payment is adjusted for early or delayed retirement. Workers get less than 100% of their PIA if they claim before FRA and more than 100% of their PIA if they claim after FRA.
There are three important qualifications to the process discussed above. First, eligibility for retired-worker benefits begins at age 62 — no one can claim any earlier. Second, delayed retirement credits stop accruing when you turn 70, so there is no advantage to claiming any later. Third, benefit adjustments for early or delayed retirement depend on how many months early or late benefits start. Readers can use this calculator from the Social Security Administration to get more personalized details.
The chart below details the relationship between birth year and FRA. It also shows the Social Security benefit (as a percentage of PIA) retired workers in each group would receive if they claimed at 62 and 70. In other words, the chart shows the maximum reduction for early claimers and the maximum increase for late claimers.
| 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.
Social Security benefits for retirees with median earnings
Labor Department data shows that U.S. workers 25 and older had median weekly earnings of $1,170 in 2023, which is about $60,800 annually. That means half of the working population earned less than $60,800 last year, and half earned more.
Listed below are the Social Security benefits at different claiming ages in 2024 for a hypothetical retiree who had median earnings throughout their career. In other words, their inflation-adjusted income each year was equivalent to $60,800 in 2023.
- Age 62: $1,567 per month ($18,804 per year)
- Age 66: $2,134 per month ($25,608 per year)
- Age 67: $2,288 per month ($27,456 per year)
- Age 70: $2,863 per month ($34,356 per year)
As you can see, workers can substantially increase their monthly benefit by delaying Social Security. For example, once workers reach FRA, their payouts increase by two-thirds of 1% per month (or 8% per year) until age 70. More importantly, several studies have concluded that a majority of workers would maximize their lifetime Social Security benefits by claiming at age 70.
Of course, there is no one-size-fits-all solution. There are situations when it would make sense to claim Social Security at age 62. But workers should bear in mind how claiming age impacts monthly benefits. Understanding that could ultimately lead to you enjoying a higher living standard in retirement.
