If you’re considering retirement, you’ve probably asked questions about the maximum Social Security benefit. This year, the maximum Social Security benefit for a beneficiary at full retirement age (FRA) is USD 2,639. The amount is about USD 30 less than the maximum monthly retirement benefit published in 2015.
Social Security Administration (SSA) states that the maximum retirement benefit is limited to workers with taxable earnings over a minimum of 35 work years. If you retire before reaching FRA or work fewer years, you won’t receive the maximum retirement benefit from Social Security. This year, the average Social Security retiree receives about USD 1,341 per month. Review your Social Security statement online at https://www.ssa.gov/myaccount/
Calculating Social Security Retirement Benefits
Social Security uses a series of calculations to determine your Social Security retirement benefits. SSA first identifies your 35 highest earning work years if you worked 35 years or more. Wages are next index to consider inflation. Then, wages are multiplied by a certain factor that’s based upon the year(s) in which a salary was earned. The SSA model compares buying power using the present USD value. This valuation comparison is crucial because your wages might not have kept pace with inflation.
After indexing your earnings, the Average Indexed Monthly Earnings (AIME) is calculated by dividing the total of indexed income/wages by 420 (12 months x 35 years):
If you worked less than 35 years, SSA adjusts the calculation according to their model.
SSA next considers other factors, such as whether you’ve reached FRA.
The age at which you request Social Security retirement benefits can significantly affect your monthly benefit amount. If you’re already 66 years old (FRA this year), your maximum monthly benefit would be USD 2,639. If you’ve already celebrated your 67th birthday, SSA will grant credits for deferred retirement:
This year, deferring retirement will earn an added 8 percent for each year over FRA, up to your 70th birthday.
If you retire at 69 this year, your retirement benefits are about 24 percent higher than retirement benefits paid to an individual retiring at 66 with an identical earnings history.
In contrast, if you request retirement benefits before FRA, your Social Security benefits will be less to account for the added years over which you’ll receive Social Security retirement income.
If you were born in 1960 or thereafter, your FRA is age 67. If you request Social Security benefits at age 62, SSA will reduce your monthly benefit by approximately 30 percent. To learn more about how to maximize your Social Security retirement benefits, visit www.ssa.gov.
Maximum Social Security Retirement Benefits
Many Americans express concerns about retirement. If you’re one of them, you’ve probably asked how much money you’ll receive from Social Security at retirement. As long as you’ve paid Social Security tax and earned enough credits over your working years, you can count on SSA retirement benefits even if you don’t have a pension or private retirement savings accounts.
Beneficiaries aren’t guaranteed the maximum Social Security benefit. Unless you worked at least 35 years, earned enough credits, and waited to request retirement benefits until full retirement age, you won’t earn maximum Social Security benefits.
It’s possible to make the most of your Social Security benefit by waiting until FRA or later, up to age 70. Many people still retire and request Social Security on their 62nd birthday. You should know that for each year you wait past 62, your imputed return is 8 percent/year on your Social Security lifetime benefits. That means if you wait from age 62 to your 70th birthday, your Social Security retirement benefits will climb. Benefits don’t increase after age 70. Use the retirement calculator on the Social Security website to estimate how much your benefits could grow by waiting to request them.
Boston College researchers recently polled a group of future retirees. About 90 percent of them said that retiring at age 70 doesn’t pose a problem for them. The study also found that retiring later helped some folks focus on saving a bit more for retirement in IRAs and 401ks. Many people are living longer, so it’s important to consider how to pay for a longer retirement.
Don’t forget to check your spouse’s Social Security retirement. Even if he or she never worked, it may be possible to qualify for benefits at age 62 if you’re currently receiving or eligible for Social Security retirement benefits. Your spouse can also qualify for Medicare coverage at 65.
Boost Earnings Now for Maximum Social Security Benefits
As you can see, earning as much as possible before you request Social Security retirement benefits can boost your benefits later. Since your 35 highest earning years are used to determine your maximum Social Security benefit, asking for a raise or taking a second job now could make good financial sense. Starting a home-based, part-time business is ideal for many people who want to save more before retirement and get larger Social Security retirement benefits. Learn more about how to get more from your Social Security benefits at SSA.gov.