As your retirement approaches, understanding Social Security claiming strategies is crucial for maximizing benefits and ensuring financial stability even for financially successful families.
Claiming Trends
If you’re considering retirement, you likely know that you can claim reduced retirement benefits as early as age 62, but the longer you wait to claim (up to age 70), the higher your monthly benefit amount. These adjustments are intended to ensure that an individual with average life expectancy receives approximately the same lifetime benefits regardless of when they begin receiving benefits.
What is not commonly understood is that these actuarial adjustments were developed decades ago, and significant changes in longevity and interest rates have skewed the adjustments. In effect, these out-dated adjustments make Social Security delayed claiming strategies a good deal for many and particularly higher income families who have greater longevity on average.
So when do Americans tend to start Social Security? The table below shows 2022 data from the Social Security Administration on claiming age and the average benefit they received.
| Age | % of Claimants | Average benefit | % Increase Vs. Prior Age |
| 62 | 27% | 1,288 | n/a |
| 63 | 8% | 1,510 | 17% |
| 64 | 8% | 1,625 | 8% |
| 65 | 13% | 1,875 | 15% |
| 66 | 25% | 2,040 | 9% |
| 67 | 4% | 2,400 | 18% |
| 68 | 3% | 2,595 | 8% |
| 69 | 2% | 2,807 | 8% |
| 70+ | 10% | 3,065 | 9% |
Some inferences can be made from the table. The average benefit at full retirement age (67) is nearly twice that vs. of the average benefit age 62. However, for someone starting benefits early at age 62, the reduction is 30% — not 50%. Therefore, we can infer those taking benefits at 62 (and other ages prior to 67) have lower average benefits due to earning less over time.
Once you reach age 68, you see increases at ~8% per year. This 8% is increase yearly from age 67 to age 70 Social Security provides by deferring claiming. Thus, the increase in average benefits at these later ages is not explained by earning more or less but generally due to a deferred claiming strategy.
You also see that there are spikes of claimants around ages 62, 65 (Medicare eligibility), 66-67 (full retirement age), and age 70. These spikes are at knee-jerk ages – dates shown on your Social Security statement or coinciding with Medicare – and thus not necessarily based on analysis and strategy. The exception would be age 70, since benefits don’t increase beyond this. Yet, sadly there’s still a small percentage of claimants that wait beyond age 70 and lose benefits they’re entitle to. Perhaps unsurprisingly, these sleepy claimants’ average benefits are much lower on average than others claiming at these later ages. Darwin strikes again.
In 2022, the weighted average age of all newly retired workers filing for benefits was about 65 years. In 1998, the weighted average age was 63.5 years. So, the average claiming age has risen substantially since 1998. And only a small part of this trend can be explained by some portion of workers staying on the job longer.
I’d like to believe sound financial advice over the years his influenced this trend in claiming age. When I started giving Social Security claiming advice more than twenty years ago, it was often a giant emotional hurdle to get over. Today it tends to be more of a speed bump at most. The math was the same then and now.
Benefits of Delay
A few brief comments on some often-underappreciated, more insurance-like protection benefits of delayed claiming strategies.
Inflation Adjustments: Social Security benefits are adjusted annually based on the Consumer Price Index (CPI-W). This inflation adjustment, known as the Cost-of-Living Adjustment (COLA), helps protect purchasing power against rising prices. Many have benefited tremendously from these inflation adjustments over the last few, high-inflation years. And the larger your benefit, the more dollars resulted from your COLA.
Longevity Protection: Social Security pays as long as you live, providing a solid foundation to your retirement plan. For married couples, Social Security provides an enhanced “survivorship benefit”. In short, the higher of the spouse’s benefits continues until the second spouse’s death.
Conclusion
The claiming decision isn’t simple nor some rule of thumb. Everyone’s situation is different. Factors such health status, projected longevity, age differences of spouses, total lifetime dollars, other available financial resources and their expected growth rates, and more combined to influence your optimal claiming strategy.
You will only retire once (hopefully) and make the Social Security claiming decision. Not a bad idea to seek competent, professional guidance on not only optimizing your benefits but aligning them with your other resources to support and protect your financial life plan.
Kevin Kroskey CFP® | True Wealth Design | April 2024
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See Also:
Social Security Claiming Age: Importance, Claiming Behavior, and Trends | Bipartisan Policy Center
