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What age should you file for social security to get the maximum benefits?

The age you retire at affects the maximum monthly payment you can receive, but that doesn't necessarily mean you should work as long as possible.

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What age should you file for social security to get the maximum benefits?
Anna Moneymaker AFP

Social security has been in the news a lot recently, due to the changes that are going to be made to the COLA for 2022, as well as the situation with a potential shutdown of Congress in October.

In terms of pensions, the full retirement age in the US is 62. It would make sense then that you would receive the largest social security payment then, wouldn't it. In fact, the optimal age is actually 70, where you could receive up to a $1,000 more a month than someone who retired at 62.

Of course, there are few who would choose to work until they are 70-years old, so that is the trade-off to consider.

What is taken into account when the benefits are calculated?

For retirees, the main factors taken into consideration are the age of retirement and the 35 years in which the worker earned the most, as an annual average.

In 2020, around 74.2 percent of those receiving social security benefits were retirees, with the average benefit amount being $1,544.

For retirees, the maximum benefit amount depends on the year one retires. Those who chose to retire before 65 are penalized with lower benefits. The highest benefits are given to those who retire at the age of 70, $3,895; followed by those who retire at sixty-five, $3,113. Those who opt to retire before the full retirement age, 62, can receive a maximum benefit of $2,324 a month.

Benefit amounts are determined by looking at the thirty-five years of work where the retiree earned the highest income. Years earlier in one's career are "adjusted or “indexed” to account for changes in average wages since the year the earnings were received.

The full list for this can be found here.

So you should work until you are 70, right?

Despite the enticing amount of money to convince people to work longer, the majority of Americans retire earlier than 70.

A Gallup poll found the average age of retirement in the US is actually 61. 48% of Americans have extra money saved for retirement, meaning middle-class Americans don't need to work so long. Those who have worked in low paid jobs most of their lives lose out, as they are the ones who need to keep working to subsist, but have the slight reward of larger monthly payments when they do finally stop working.

In theory, someone who retires at 70 in 2021 could receive the maximum allowance of $46,740 a year. That would still be just under $5,000 off the national average wage of $51,480. Make sure to try and save for your pension early, because even the maximum state pension is not likely to be adequate.