Approximately Optimal Social Security Claim Age Revealed in New Data
Optimizing Social Security benefits can significantly impact a typical worker's lifetime spending, with a potential increase of up to 10.4 percent for individuals aged 45 to 62, according to a 2022 study by the National Bureau of Economic Research [1].
The decision to claim Social Security benefits depends primarily on your expected lifespan, financial needs, and retirement goals. If you expect to live beyond your late 70s, it is financially advantageous to wait to claim benefits until your full retirement age (FRA), typically 66-67, or delay further up to age 70 to maximize monthly payments [1][2][4][5]. Benefits increase about 8% per year delayed after FRA until 70, potentially yielding up to 80% higher benefits at age 70 compared to claiming at 62.
On the other hand, if you expect a shorter lifespan or need income earlier, claiming as early as age 62 is an option but will permanently reduce your monthly benefits, possibly by 25-30% or more depending on your FRA [2][3]. Studies indicate the "break-even" age—when total collected benefits surpass those who claimed early—is around age 77 to 81; thus, if you expect to live past this age, delaying benefits is usually optimal [1].
Personal factors such as health, financial situation, employment status, and other retirement income sources also strongly affect when to file. For example, if you do not depend on Social Security for immediate income, delaying can be better [4]. Conversely, early retirement or financial necessity may compel earlier claiming despite lower monthly checks [3].
The Social Security Administration (SSA) has a life expectancy calculator and allows users to calculate total lifetime benefits, depending on the age when one claims [6]. It's essential to consider these factors alongside personal circumstances and possibly consult a financial advisor to tailor the decision optimally.
Headlines about the Social Security trust funds running dry by 2034 may have incorrectly led some retirees to claim Social Security early. However, the SSA adjusts monthly checks based on the age at which benefits are claimed, with the intention of providing similar lifetime benefits to all program beneficiaries [6].
In a 2022 study by the National Bureau of Economic Research, it was concluded that almost all Americans between the ages of 45 and 62 should wait until age 65 to claim Social Security benefits [2]. For one in four, the lifetime spending gain exceeds 17 percent if they wait until 70 to claim Social Security benefits [1]. For one in ten, the gain exceeds 26 percent if they wait until 70 to claim Social Security benefits [2].
In a 2019 study by United Income, it was found that 92% of Americans should wait until at least 65 before claiming Social Security benefits, and 71% of Americans should hold off until age 70 to reap the maximum benefits from Social Security [3].
In conclusion, waiting until full retirement age or age 70 maximizes monthly benefits and is recommended if you have good health and long life expectancy. Claiming early may be suitable if you need income sooner or expect a shorter lifespan [1][2][3][4]. Each individual should weigh these factors alongside personal circumstances and possibly consult a financial advisor to tailor the decision optimally.
[1] National Bureau of Economic Research (2022). "The Timing of Retirement and Social Security Benefits: Evidence from Administrative Data." [2] National Bureau of Economic Research (2022). "The Timing of Retirement: Evidence from Administrative Data." [3] United Income (2019). "The Truth About Social Security." [4] Social Security Administration (n.d.). "When to Start Receiving Retirement Benefits." [5] Social Security Administration (n.d.). "Retirement Planner: Calculators." [6] Social Security Administration (n.d.). "Life Expectancy Calculator."
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