Social Security accounts for more than half of the retirement income for 50% of married couples, so making sure that you get the most money possible from the program is important to achieving financial security in your golden years. The most common age to start receiving Social Security benefits is 62, the earliest age possible, but if you want to collect 100% of the benefits you're owed, you'll have to wait until full retirement age (FRA) to claim them. If you file early, Social Security will penalize you with smaller checks.
How much is the maximum you can get in Social Security if you claim at age 62? The amount may disappoint you.
A big penalty
Your monthly full retirement-age Social Security benefit is determined by a complex formula that averages your highest 35 years of inflation-adjusted income and then reduces that average at specific income thresholds called bend points.
IMAGE SOURCE: GETTY IMAGES.
Full retirement age depends on your birth year. If you were born between 1943 and 1954, your FRA is 66, and if you were born after 1955, it ranges between age 66 and 2 months to age 67. If you retire at that age, you'll get 100% of the amount you're owed in Social Security benefits, but if you claim earlier than that, the amount you get will be significantly less.
The exact amount in benefits you get when you claim at age 62 depends on how many months prior to FRA you begin receiving your benefit. Specifically, your benefit is reduced by 5/9 of 1% for each month you claim early, up to 36 months. If you claim more than 36 months early, your benefit is reduced by an additional 5/12 of 1% per month.
For instance, if your FRA is 67 and you claim Social Security at age 62, you'd be claiming 60 months early. Using the percentages mentioned above, your payment at age 62 would be 30% lower than it would be at FRA.
| Claim Early Benefit Reduction Amounts (FRA of 67) | |
|---|---|
| Age | Reduction |
| 62 | 30% |
| 63 | 25% |
| 64 | 20% |
| 65 | 13.3% |
| 66 | 6.7% |
DATA: SOCIAL SECURITY ADMINISTRATION. AUTHOR'S TABLE.
The maximum Social Security you can collect at 62
Social Security pays benefits to current Social Security recipients with money that's collected in payroll taxes on current workers. In 2018, those payroll taxes apply to taxable earnings of up to $128,400.
When Social Security calculates your FRA benefit, it won't give you credit for any earnings over the maximum earnings limit, so there's a maximum amount you can get in Social Security benefits, regardless of your income.
In 2018, the maximum amount you can get in benefits if you're at the maximum taxable earnings limit and you claim at age 62 is $2,158.
| Maximum Social Security if You Retire in 2018 | ||
|---|---|---|
| Age | Per Month | Per Year |
| 62 | $2,158 | $25,896 |
| 65 | $2,589 | $31,068 |
| 70 | $3,698 | $44,376 |
DATA SOURCE: SOCIAL SECURITY. CHART BY AUTHOR.
Get credit for waiting
There are plenty of reasons why it can make sense to claim benefits as soon as you can, but you you can collect significantly more in monthly benefits if you decide to delay Social Security rather than take it at age 62.
If you hold off claiming Social Security, you get rewarded with delayed retirement credits that increase your benefit for every month you wait. If you were born in or after 1943, those credits increase your benefit by 2/3 of 1% for every month beyond FRA that you delay, up to age 70. That translates into an 8% annual increase. For instance, if your FRA is 67 and your monthly full retirement benefit is $1,000, then delaying until age 70 results in a monthly check of $1,240, or 24% more than you'd receive at age 67.
The amount you can get in benefits by waiting is illustrated in the following table, which breaks out the increases you can receive by FRA at ages 66, 67, and 70.
| Birth Year | Full Retirement Age | Percentage Paid If Claiming at 66 | Percentage Paid If Claiming at 67 | Percentage Paid If Claiming at 70 |
|---|---|---|---|---|
| 1943-54 | 66 | 100% | 108% | 132% |
| 1955 | 66, 2 months | 98 8/9% |
106 2/3% |
130 2/3% |
| 1956 | 66, 4 months | 97 7/9% |
105 1/3% |
129 1/3% |
| 1957 | 66, 6 months | 96 2/3% |
104% | 128% |
| 1958 | 66, 8 months | 95 5/9% |
102 2/3% |
126 2/3% |
| 1959 | 66, 10 months | 94 4/9% |
101 1/3% |
125 1/3% |
| 1960 and later | 67 | 93 1/3% |
100% | 124% |
Data source: Social Security Administration.
Ultimately, when to claim Social Security is a personal decision that's going to depend on your health, retirement goals, sources of retirement income, and expenses. However, if you want to get the maximum amount of money possible from Social Security and you're already at the maximum earnings limit, waiting could make more sense than claiming at age 62.
