Deciding the age at which to go for retirement is a whole chess game. Moving one piece here and another one there can mean scoring a victory and having more money, or losing cash every month for the rest of your life.
While age 70 might not be the most popular choice among retirees, it holds the promise of substantial rewards for those willing to exercise a bit of patience. Over 21.7 million individuals, including 15.4 million adults aged 65 and above, are lifted out of poverty each year by this vital program. For nearly 9 out of 10 retirees, Social Security plays a crucial role in meeting their financial needs.
Is Age 70 the Best Age for Retirement?
Breaking it down to the basics, there are four key elements that determine the size of your monthly Social Security check:
- Work History: Your employment journey matters. The Social Security Administration considers your 35 highest-earning, inflation-adjusted years when calculating your benefit. Working at least 35 years is crucial, as each year less than that averages a zero into your calculation.
- Earnings History: The more you earn during those 35 years, the larger your Social Security check during retirement. Maximizing your payout requires a robust earnings history.
- Full Retirement Age: This age, determined by your birth year, signifies when you become eligible to receive 100% of your retired-worker benefit. For those born in 1960 or later, full retirement age is 67.
- Claiming Age: Perhaps the most impactful element, your claiming age can significantly affect your monthly and lifetime benefits. While you can claim benefits as early as age 62, exercising patience pays off. Waiting to claim until age 70 can increase your monthly check by up to 8% for each year you delay, as illustrated in the table below.
Waiting until 70 Could Be Better for Your Future
While starting early, potentially at age 62, will give you money sooner, it will end up in reduced benefits every month. Meanwhile, waiting until age 70 for increased monthly payouts.
The Social Security payout schedule illustrates these differences. Opting for early retirement at 62 results in a reduction of up to 30% in your monthly check. Waiting until age 67 allows you to receive 100% of the monthly payout due, while holding out until age 70 can boost your monthly benefits by 24% beyond what you’d get at full retirement age.
At age 70, beneficiaries receive a substantial monthly check. According to December 2022 data from the Social Security Administration (SSA), the 2,955,215 retired workers at this age were enjoying $1,963.48 per month, roughly $23,562 annually. Notably, this is 6% higher than the average monthly benefit for those at age 67 and an impressive 54% higher than the $1,274.87 received by 62-year-old beneficiaries.
Despite being the seventh most popular claiming age in 2022, age 70 has been gaining popularity over the years. This trend might continue, driven by increasing life expectancy. In 1940, when Social Security began, the average life expectancy in the U.S. was around 63 years. Fast-forward to today, and life expectancy at birth has surpassed 76 years. With people living longer, it’s logical for retirees to delay claiming benefits for a more substantial monthly income.
Statistically, claiming at age 70 could be a sensible choice for many retirees. While it might not have been the most popular option in 2022, the growing interest in this age suggests a shift in mindset. The decision to wait until age 70 reflects the understanding that a larger monthly check can provide greater financial security in the later stages of retirement.