A recent survey from the Nationwide Retirement Institute spotlights two particularly important Social Security knowledge gaps. First, less than 10% of participants correctly identified all the factors that determine their maximum Social Security benefit. Second, less than 30% of participants were aware that claiming decisions could be undone under certain circumstances.
Read on to learn how to maximize Social Security benefits, how to undo a claiming decision, and how those little-known tips could earn retirees an extra $2,163 per benefit check in 2024 (or its equivalent thereafter).
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How to get the maximum Social Security retired worker benefit
Retired workers must meet three specific criteria to qualify for the maximum Social Security benefit:
- Work for at least 35 years: The Social Security Administration uses inflation-adjusted earnings from the 35 highest-paid years of work to calculate the primary insurance amount (PIA) for each worker when they reach entitlement at age 62. The PIA is the benefit a worker would receive if they started Social Security at full retirement age (FRA). Any worker with less than 35 years of employment will have zeroes factored into the calculation, disqualifying them from the maximum Social Security benefit.
- Earn more than the taxable maximum: Not all wages are relevant to the Social Security benefits formula. Any income below the maximum taxable earnings limit counts toward the PIA, but any income above that threshold is not considered. That means any worker that wants the biggest Social Security benefit must have income equal to or exceeding the taxable maximum for at least 35 years. For context, the taxable maximum is $168,600 in 2024, but the amount is adjusted each year based on changes in the national average wage index.
- Start Social Security at age 70: Claiming age has a profound impact on Social Security benefits. Workers than claim before FRA receive a lower payout for life, meaning they get less than 100% of their PIA. Workers that claim after FRA receive a higher payout for life, meaning they get more than 100% of their PIA. The only caveat is that workers stop accruing delayed retirement credits at age 70, so it never makes sense to start Social Security any later.
To quantify the impact of claiming age, the chart below details the maximum retired worker benefit at different ages in 2024. As mentioned above, only workers that claim Social Security at age 70 will get the absolute maximum.
Chart by author.
Next year, the maximum retired worker benefit at age 70 is $4,873 per month. That equals $2,163 in additional monthly income compared to the maximum retired worker benefit at age 62.
How early and delayed retirement impact Social Security benefits
As discussed, starting Social Security before FRA permanently reduces the payout, and claiming Social Security after FRA permanently increases the payout. Here's exactly how that works:
- Early retirement: Workers that claim Social Security before FRA have their benefit reduced by five-ninths of 1% per month (for up to 36 months). If the worker is claiming more than 36 months before FRA, their benefit is reduced by five-twelfths of 1% for each month beyond the first 36 months. That means a worker that claims Social Security five years before FRA would receive 70% of their PIA in monthly benefits.
- Delayed retirement: Workers that delay Social Security beyond FRA begin accumulating delayed retirement credits at a rate of one per month. Each delayed retirement credit adds two-thirds of 1% to their benefit. That means a worker that claims Social Security three years after FRA would receive 124% of their PIA in monthly benefits.
The chart below details the smallest and largest Social Security benefit (as a percentage of PIA) retired workers can receive based on their birth year.
Chart by author.
The chart above shows that a worker born in 1960 or later would get 70% of their PIA if they claimed Social Security at age 62, but they would receive 124% of their PIA if they claimed Social Security at age 70. In other words, that worker can increase their retirement benefit by 77% if they claim at age 70 rather than age 62.
Retired workers can (sometimes) undo claiming decisions
Thus far, this piece has been geared toward workers that have not claimed Social Security. Any reader on track to earn the maximum retired worker benefit knows that, by claiming at age 70 instead of age 62, they can increase their payout by $2,163 per month (in 2024 dollars).
The increase in nominal dollars will change over time, but the principle remains constant. A worker born in 1960 or later can increase their benefit by 77% if they claim Social Security at age 70 rather than age 62.
Under certain circumstances, the information discussed in this article is also relevant to retirees who have claimed Social Security. The little-known claim reversal clause allows current beneficiaries to withdraw or cancel their benefits application by filing a form SSA-521 with the Social Security Administration.
However, there are two important eligibility restrictions: (1) Retirees can only cancel or withdraw their benefits application within 12 months of approval, and (2) they will have to repay every dime they have received from Social Security, including any Medicare premiums withheld and any spousal benefits claimed against their work record.
Retirees that meet those restrictions can file a form SSA-521, and doing so allows them to reap the full reward of delaying Social Security until age 70. That means they could increase their benefit by up to $2,163 per month (in 2024 dollars).
