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Maximum Social Security Benefits: What It Is And How to Get It

Retirement is a big milestone, and planning for it in advance can help ensure a smooth transition to your non-working years of life. One program that can offer support during retirement is Social Security, which is a federal benefits program designed to provide partial replacement income to beneficiaries. Its official name – Old-Age, Survivors, and Disability Insurance (OASDI) program – suggests the scope of beneficiaries, including retired individuals, their spouses, and those with disabilities.

As a beneficiary, one of the most important aspects to consider is the maximum Social Security benefit. This depends on the age at which the individual receiving the compensation has retired and when the benefits were claimed. For instance, the maximum Social Security benefit at age 70 differs from the maximum Social Security benefit at age 62. Consider consulting with a professional financial advisor who can advise you at what age you should claim your Social Security benefits to have a comfortable retirement.

To understand more about maximum Social Security benefits, its eligibility criteria, how Social Security is calculated, and what you have to do to receive the maximum Social Security benefits, read further.

What is the maximum Social Security benefit?

The maximum Social Security benefit is the maximum sum of money you can get from a Social Security check. This value changes yearly and is based on the age of the individual drawing the benefit.

For instance, as per the official website of the Social Security Administration in 2022:

1. The maximum Social Security benefit at age 62 is $2,364.

2. The maximum Social Security benefit at age 67 is $3,345.

Note: This is also considered a Full Retirement Age. Full Retirement Age (FRA), also known as normal retirement age, refers to the age at which you are eligible to receive full Social Security retirement benefits. It is 66 years and 2 months for all 1955-born workers and 66 years and 4 months for those born in 1956. For those born after 1960, the FRA is 67.

3. At age 70, the maximum Social Security benefit touches $4,194.

As seen above, you can begin to claim Social Security benefits at age 62 (below the FRA). Doing so will, however, reduce your retirement benefit amount. To understand this, you need to know how Social Security is calculated. Read further to know.

How is Social Security calculated?

Social Security comes with its own eligibility criteria.

You must be 62 years of age (minimum) or disabled or blind and must have 40 work credits. 40 work credits would compare to 10 years of work, as you can earn as many as four credits per year, depending on your earnings. Note - 40 credits are required to claim benefits under retirement. If you are disabled or claiming survivor benefits, the credit requirements are different.

The first step in calculating Social Security benefits is to combine the compensation as received in your 35 highest-earning years. Every wage you have earned is considered if you have only worked for exactly 35 years. If you have not worked for 35 years, a zero value is assigned to the absentee years.

Next, the considered salaries are adjusted for inflation. This is done to compute the amount earned to its current buying power. This indexing process is critical because the value of $1,000, for instance, in 1922, is very different from its value in 2022. After adjusting for inflation, the 35-highest earning years are used to compute the average indexed monthly earnings value, popularly referred to as AIME. To get the AIME value, you will have to divide the sum of the 35 highest earnings amounts by the number of months in 35 years, i.e., 420 months.After the AIME is arrived at, the Social Security benefit value is calculated using a Primary Insurance Amount formula. This formula is based on the year the worker will collect benefits, the cost of living, and the AIME value.

[See: Is Social Security Taxable?]

Who is eligible for maximum Social Security benefits?

Being eligible for maximum Social Security benefits is slightly different from being eligible for Social Security. To qualify for the maximum Social Security benefit, your earnings must be more than or equal to the maximum taxable income for at least 35 years of your working period. The maximum taxable income refers to the earnings amount based on which you are made to pay taxes by Social Security. The maximum taxable income is $147,000 for 2022. However, this number is revisited every year. It is altered based on national wage levels and factors such as inflation. As a result, the maximum benefit value also changes annually.

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How to receive the maximum Social Security benefit

While the Social Security benefits offer good support during retirement, it is essential to note that only some people can access the maximum amount. As per the Social Security Administration, the average monthly retirement benefit was $1,628.17 in September 2022. For instance, to access the maximum Social Security benefit amount for 2022 (which is $4,194), you not only have to be a high-income earner for 35 years but also should defer collecting the benefits till the age of 70.

You may fulfill the following two conditions to earn the maximum Social Security benefit:

1. Contribute the maximum amount

As discussed above, Social Security is calculated by considering your highest-paid 35 years, adjusted for inflation, and averaging them. Naturally, you can receive the highest benefits at retirement if you contribute the maximum during your working years. Do remember that this value changes annually based on the national average wage.

2. Don’t withdraw your benefits till age 70

The Social Security benefits are maximum for those who access their funds at age 70. So, despite having the option to withdraw your Social Security funds at 62, you should ideally wait until you’re 70 to reap the maximum Social Security benefits. The longer you wait, the more the benefits. To understand this further, consider the maximum benefit values for different age groups in 2022. The difference in the amount of maximum Social Security benefit between ages 67 and 62 is $981 per month, in favor of withdrawal at the age of 67. Similarly, the retirement benefit difference between ages 67 and 70 is $849 per month, once again favored for withdrawal at a later age. Most strikingly, there is nearly a $2,000 monthly difference between the maximum benefits at age 70 and age 62, taking the annual difference to $24,000. However, it is essential to note that deferring the withdrawal after 70 does not improve the benefits.

When should you withdraw your funds for the maximum Social Security benefits?

To get the maximum Social Security benefit, workers should abstain from withdrawing funds before age 70. But, it is also essential to remember that when you choose to start taking your Social Security benefits, it should be independent of the dollar value. Instead, it should be based on your financial plan, as well as your needs and economic status as an individual. For instance, tapping into your Social Security benefits may be a wise decision if you are battling a terminal illness or find yourself in a debt cycle you want to get out of.

[See: 10 Reasons You Should Consider Claiming Social Security Benefits Early]

To conclude

Depending on one’s retirement age, the monthly maximum Social Security benefits can differ by nearly $2,000 between the ages of 62 and 70. To draw the maximum benefit, you must be a consistent high-earner and contributor for 35 years and wait till 70 to acquire these benefits. While it may seem like a good idea to wait till you are 70 to get your hands on the benefits, you should know that this is not always possible. When you should claim your Social Security benefits should be based on various factors, including your economic status, financial health, age, and life expectancy, among other parameters. Consult with a financial advisor to understand further details.

Use the free advisor match tool to connect with vetted advisors who can help you understand how to save effectively for retirement. Provide basic details about yourself, and the match tool will connect you with 1-3 advisors that are suited to help with your unique financial requirements.

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The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice.
A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.