One of the most important decisions you’ll make when it comes to retirement planning is when to claim Social Security. While most people become eligible to apply for benefits starting at age 62, many decide to wait at least a few years before they claim their benefits.
Following the wisdom of the crowd is often a smart financial strategy that can keep you from making big mistakes with your money. Should you do that here and claim benefits at the average retirement age, or should you forge your own path in retirement?
Before you make a decision, consider the average age Americans claim Social Security benefits and how much you can expect to receive each month.
Here’s when the average American claims Social Security
The average age for retired workers to claim Social Security has steadily climbed since the start of the century. That’s due to changes in the Social Security laws, which raised the full retirement age from 65 to 66 and then from 66 to 67, depending on when you were born. It also impacted the penalty or credit beneficiaries received for claiming early or delaying benefits.
If you claim your retirement benefits before full retirement age, you’ll see a reduction in your monthly check. The reduction is based on how far away you are from full retirement age. So those claiming at age 62 who had a full retirement age of 65 saw a smaller reduction in benefits than those with a full retirement age of 66 or 67.
If you claim your benefit after your full retirement age, you’ll receive a bigger monthly check. Those born in 1943 or later receive an additional 8% on their checks for each year they delay beyond full retirement age. But that annual percentage was smaller for those born earlier. For example, someone born in 1932, with a full retirement age of 65, would receive just 125% of his or her primary insurance amount by delaying until age 70. By comparison, someone born in 1960 or later, with a full retirement age of 67, can receive 124% of his or her primary insurance amount by delaying until age 70.
All this is to say the range of potential benefits for claiming early versus delaying has widened substantially over the past 25 years. As a result, retirees are rewarded more for each year they delay, and they’ve naturally increased the age at which they apply for Social Security benefits.
The average retired worker claimed Social Security benefits at 63.4 (men) or 63.5 (women) in 1998, according to a bulletin from the Social Security Administration. In 2018, that age climbed to 64.7 (men) or 64.6 (women). Based on the data from the latest Social Security statistical supplement, the average age of someone receiving a new Social Security retirement benefit award in 2022 (excluding disability conversions) was 65.0 for men and 64.9 for women.
Here’s the average amount retirees receive when they apply for benefits
The average benefit awarded to a new retiree in 2022 was $1,938.75. Those retirees are receiving an average check of about $2,174.86 in 2024 after the cost-of-living adjustments made in 2023 and 2024.
While you’d expect anyone who claimed earlier than average to receive a below-average benefit, it may be surprising that those who claimed at age 65 still received a benefit less than the average new award in 2022. The average 65-year-old who newly applied for Social Security retirement benefits in 2022 received a monthly check of $1,874.56.
That reflects the discrepancy in circumstances that often leads people to claim their Social Security benefits earlier rather than later. Those who delay benefits beyond their full retirement age have, on average, a higher primary insurance amount than those who claim earlier. That suggests those claiming before their full retirement age earned less in their career, which may have led to less retirement savings, thus requiring them to claim benefits earlier to supplement their retirement income.
Should you claim at the average retirement age?
Age 65 is often thrown out as the standard retirement age. It’s the age at which you become eligible for Medicare, so it makes sense for a lot of people to work at least until that age to maintain health insurance coverage.
But claiming Social Security at age 65 could be a big mistake for many retirees.
If you’re able to afford your retirement on your own savings, it will probably work out in your favor to delay your benefits until at least your full retirement age, if not until 70. More often than not, you’ll maximize your lifetime benefits by waiting until age 70, according to the most recent data from the CDC on life expectancy. So unless you have reason to believe you’ll have a shorter life than the average retiree, you should try to delay as long as possible.
That strategy is further supported by a 2019 study from United Income. The researchers found the majority of retirees would maximize their wealth by waiting until age 70 to claim benefits. The next best age, 67, would only maximize wealth for about 10% of retirees. Meanwhile, just 8% are better off claiming before age 65.
The wisdom of the crowd doesn’t seem to work as well when it comes to Social Security claiming decisions. That’s because everyone’s retirement will look different and come under different circumstances. If you have the luxury to plan for the long term, you should wait to claim benefits until later in life.
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Here’s the Average Age Americans Claim Social Security and the Monthly Benefit They Receive was originally published by The Motley Fool
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