In general, Social Security benefits are based on three variables: work history, lifetime earnings, and claiming age. That sounds pretty simple, right? Well, a recent survey from Nationwide Retirement Institute suggests that less than 10% of adults can correctly identify the factors that determine their maximum Social Security benefit. That knowledge gap can lead to lost income in retirement, which itself can cause a substantial reduction in standard of living.
Read on to see the maximum Social Security benefit for retired workers at ages 62 and 70, and to learn why claiming age is such an important part of the calculation.
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How to get the maximum Social Security benefit in 2024
The Social Security benefits formula is updated annually to account for changes in general wage levels across the economy. Those changes typically cause benefit amounts to increase each year. For instance, the maximum Social Security benefit for newly retired workers is $4,555 per month in 2023, but it will increase to $4,873 per month in 2024.
Workers hoping to qualify for the maximum Social Security benefit when they retire must follow these three steps:
Step 1: A retired worker's primary insurance amount (PIA) -- the benefit they would receive if they claimed Social Security at their full retirement age (FRA) -- is based on their work history. Specifically, the PIA formula takes into account inflation-adjusted earnings from the 35 highest-paid years of work during their career.
So the first step to receiving the maximum Social Security benefit is to work for at least 35 years, because a zero is added to the equation for each missing year.
Step 2: The PIA formula considers inflation-adjusted income up to the maximum taxable earnings limit. That threshold tends to increase each year based on changes in the national average wage index, as shown below:
|
Year |
Maximum Taxable Earnings Limit |
|---|---|
|
2020 |
$137,700 |
|
2021 |
$142,800 |
|
2022 |
$147,000 |
|
2023 |
$160,200 |
|
2024 |
$168,600 |
Data source: Social Security Administration.
So the second step in getting the maximum Social Security benefit is to make more money than the maximum taxable earnings limit for at least 35 years.
Step 3: Workers are entitled to retirement benefits at age 62, but claiming Social Security before your FRA results in a permanent payout reduction, and claiming Social Security after your FRA results in a permanent payout increase. However, there is no advantage to delaying beyond age 70 -- doing so would simply leave money on the table.
So the third step in scoring the maximum retired-worker benefit is to claim Social Security at age 70.
Claiming age has a profound impact on Social Security benefits
All three variables play important roles in determining Social Security income. But claiming age is the one most easily controlled by workers nearing retirement, and it can have a profound impact on the calculation.
The chart below illustrates just how big the impact can be. It shows the maximum Social Security benefit for retired workers at different claiming ages in 2024.
Chart by Author. Note: workers born in 1958 will reach FRA in 2024 at age 66 and 8 months, and workers born in the last few months of 1957 will reach FRA in 2024 at age 66 and 6 months.
Next year, the maximum retired-worker benefit will be $2,710 per month at age 62, but it will be $4,873 per month at age 70. That means retired workers who delay Social Security until age 70 could receive an additional $2,163 each month in 2024, or an additional $25,956 for the full year.
Delaying Social Security until age 70 results in a much bigger benefit
Very few retired workers will get the maximum Social Security benefit because very few people make enough money. Last year, less than 7% of workers had income exceeding the maximum taxable earnings limit, and even less are likely to hit that mark in 35 different years. That means a fraction of the population will qualify for the biggest payout.
Even so, the concepts discussed in this article, especially the profound impact claiming age has on Social Security payouts, are still relevant.
Consider a retired worker born in 1960 with a PIA of $2,000 per month. Their FRA is age 67, as defined by their birth year, meaning they would receive $2,000 per month if they start Social Security at age 67. Accordingly, that retired worker would only receive 70% of their PIA ($1,400 per month) if they claim Social Security at age 62, but they would receive 124% of their PIA ($2,480 per month) if they claim at age 70. In other words, their benefit would be 77% larger at age 70 as compared to age 62.
That percentage difference holds regardless of how much you're getting from Social Security. So while very few people will qualify for the maximum retired-worker benefit next year, anyone can substantially increase their payout by delaying Social Security until age 70.
