If you can maximize your Social Security benefits, you're well on your way to a dream retirement. Nearly 6 in 10 retirees say Social Security is a major source of income in retirement, according to an annual Gallup poll. Getting every penny possible out of the program requires a long career earning a well-above-average salary.
But even if you do everything you can to maximize your benefits during your career, you still have to decide when to claim your benefits. The most popular age to claim benefits is 62, but many near-retirees are likely considering waiting until 67, when they'll reach their designated full retirement age. You could delay your benefits until 70 or beyond, adding even more to your check.
There are huge differences among what you could claim at each of the three ages above, and that's extremely clear in the maximum Social Security benefits for each of them.
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How to maximize your monthly benefit
To get the most possible out of Social Security, it's important to understand how the government calculates your benefit.
The biggest factor is how much you earned during your career. When it comes time for you to retire, the Social Security Administration (SSA) selects your 35 highest-earning years, adjusted for inflation. It then averages those numbers to calculate your average monthly income and plugs that number into the Social Security benefits formula.
The number that comes out of the formula is called your primary insurance amount (PIA) -- what you'll receive if you start collecting benefits the month you reach your full retirement age. That will range from 66 to 67, depending on when you were born. Those born in 1960 or later all have the same full retirement age: 67. If you claim before your full retirement age, you receive less than your PIA. If you wait until after, you'll receive more.
Here's the important thing for high earners, though. The SSA doesn't always count all of your income in its calculation. There's a maximum amount of earnings subject to Social Security tax every year. It's called the contribution and benefit base, and the SSA adjusts the amount for inflation every year.
If you earn above the contribution and benefit base, you'll max out your contribution to Social Security in a given year. And if you do it for 35 years during your career, you'll eventually receive the highest possible benefit for your age group when you decide to retire.
For reference, here are the last 50 years of the contribution and benefits base.
| Year | Earnings | Year | Earnings |
|---|---|---|---|
| 1975 | $14,100 | 2000 | $76,200 |
| 1976 | $15,300 | 2001 | $80,400 |
| 1977 | $16,500 | 2002 | $84,900 |
| 1978 | $17,700 | 2003 | $87,000 |
| 1979 | $22,900 | 2004 | $87,900 |
| 1980 | $25,900 | 2005 | $90,000 |
| 1981 | $29,700 | 2006 | $94,200 |
| 1982 | $32,400 | 2007 | $97,500 |
| 1983 | $35,700 | 2008 | $102,000 |
| 1984 | $37,800 | 2009 | $106,800 |
| 1985 | $39,600 | 2010 | $106,800 |
| 1986 | $42,000 | 2011 | $106,800 |
| 1987 | $43,800 | 2012 | $110,100 |
| 1988 | $45,000 | 2013 | $113,700 |
| 1989 | $48,000 | 2014 | $117,000 |
| 1990 | $51,300 | 2015 | $118,500 |
| 1991 | $53,400 | 2016 | $118,500 |
| 1992 | $55,500 | 2017 | $127,200 |
| 1993 | $57,600 | 2018 | $128,400 |
| 1994 | $60,600 | 2019 | $132,900 |
| 1995 | $61,200 | 2020 | $137,700 |
| 1996 | $62,700 | 2021 | $142,800 |
| 1997 | $65,400 | 2022 | $147,000 |
| 1998 | $68,400 | 2023 | $160,200 |
| 1999 | $72,600 | 2024 | $168,600 |
Data source: Social Security Administration.
Here's the maximum possible Social Security benefit at ages 62, 67, and 70
If you earn above the maximum taxable earnings for at least 35 years in your career, you'll be able to claim the maximum possible benefit. But in order to get the biggest monthly check, you'll have to wait until 70.
That's because the SSA adjusts your PIA lower if you claim before your full retirement age, and higher if you wait until later. But it doesn't reward you for waiting beyond 70. Still, those with a full retirement age of 67 can boost their monthly payment by 24% by waiting until 70. That can be quite a significant amount.
In 2024, retirees will reach full retirement age between 66 and 67. Someone turning 70 this year would have been born in 1954, giving them a full retirement age of just 66. As a result, these retirees get an even bigger boost to their monthly checks for waiting.
Here's how the maximum monthly benefit looks at 62, 67, and 70 in 2024.
| Retirement Age | 62 | 67 | 70 |
|---|---|---|---|
| Maximum Monthly Benefit | $2,710 | $3,911 | $4,873 |
Data source: Social Security Administration.
As you can see, it pays to wait when you've already earned enough in your career to maximize your monthly Social Security benefit. Those who are 70 can collect up to $4,873 in monthly benefits this year, or $58,476. That's enough to replace the median income in the U.S. Those who are 62, by comparison, will take home just $32,520 in annual Social Security income. They'll very likely need to supplement that with other savings.
Is it worth delaying benefits in 2024?
If you earned enough throughout your career to maximize Social Security benefits, you're likely well-positioned for a relaxing retirement. You might have even saved enough to do without Social Security if you had to do so.
Still, it can be tempting to take your benefits early. That could allow you to live an even grander lifestyle in your early 60s when you add what you'll get to your existing retirement savings. Or you could keep more of your investments in your retirement accounts and let them keep growing.
But the math doesn't favor that strategy. If you delay your benefits from 62 until 70, you'll receive a guaranteed 7.4% real compound annual growth rate on your monthly annuity from Social Security. Investing can't offer that level of guaranteed growth, and if you look at the historic returns of the S&P 500, you'll find it's averaged just 6.5% real returns annually. Not to mention, investing in the stock market is far from a guarantee.
Waiting until 70 does come with some downsides. Specifically, you have to live long enough to make the decision worthwhile. But life expectancy data from the U.S. Centers for Disease Control and Prevention shows the average 62-year-old will live long enough to do better by delaying until 70. So, unless you have reason to expect you'll have a shorter-than-average life, it pays to delay.
