Just about every American hopes to get some financial support from Social Security at some point during their lives. With a formula based on you average earnings over the course of your career, Social Security calculates how much you'll be eligible to receive if you claim your benefits at various ages. Because that formula takes a limited amount of earnings into account in making its calculations, there's a theoretical maximum amount of Social Security benefits that recipients can get each month.
The maximum Social Security benefit changes from year to year, based on factors like inflation and changes in the amount of earnings taken into account for Social Security payroll taxation. The Social Security Administration just released the new maximum benefit for 2020, and the numbers are somewhat surprising in how much they differ depending on the age at which you claim your benefits.
Let's look at how to calculate the maximum benefit and why there were so many differences.
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How to get the maximum Social Security benefit
If you want to receive the most you can from Social Security, then you have to have an extremely successful career. In making its calculations of the maximum benefit, the SSA assumes that a worker has earned the maximum wage base amount each year since turning 22, giving them the full benefit of a work history of 35 years or more.
The SSA calculates maximum amounts for claimants at four different ages: 62, 65, 66, and 70. Those who were born in 1954 and therefore turn 66 in 2020 will be at full retirement age on their 66th birthdays, making that amount the baseline for benefit calculations. Those who retire earlier than 66 will suffer a reduction in their monthly benefit, while those who retire at 70 will get delayed retirement credits that boost their payouts each month.
Here, you can see the numbers for those retiring in 2020, along with those in recent years.
|
Year Retired |
Maximum at Age 62 |
Maximum at Age 65 |
Maximum at Age 66 |
Maximum at Age 70 |
|---|---|---|---|---|
|
2017 |
$2,153 |
$2,542 |
$2,687 |
$3,538 |
|
2018 |
$2,158 |
$2,589 |
$2,788 |
$3,698 |
|
2019 |
$2,209 |
$2,757 |
$2,861 |
$3,770 |
|
2020 |
$2,265 |
$2,857 |
$3,011 |
$3,790 |
Data source: SSA. Figures are the actual monthly payment in the indicated retirement year.
The most interesting thing about this chart is that the numbers don't go up by similar amounts each year for those of different ages. For instance, for those retiring at age 62, the 2018 increase was quite small, but increases since then have been larger. Yet for those retiring at age 70, the 2018 increase was larger than the 2019 and 2020 increases combined. The age 66 maximum is climbing $150 in 2020, compared to just a $20 increase for the age 70 maximum.
There are several reasons for those disparities:
- The full retirement age is in the process of going from 66 to 67, and because it's based on the year you were born, the younger claimants on the chart have higher full retirement ages than the older claimants do.
- The wage bases that people of different ages have experienced during their careers differ, giving an advantage to some over others.
- Differences in the formula bend points governing people of different ages can also produce different benefit amounts.
Getting as much as you can
The other oddity is that some older recipients who've claimed in previous years are set to get more than these maximum amounts for new retirees next year. Those who claimed at age 70 in 2018 and 2019 and qualified for maximum benefits in those years will receive $3,862 and $3,830 per month respectively in 2020. That's because COLAs have taken what were initially lower maximum benefits and boosted them above the number for 2020 retirees.
Few people get the maximum Social Security amount, because you'd have an extremely high income throughout your whole career. However, the best things you can do to maximize the size of your Social Security check are to work for at least 35 years and to wait as long as you can before claiming your retirement benefits. The more money you make, the closer you'll get to maxing out your Social Security.
