Maximizing your Social Security benefits is a key piece of any good retirement plan. Around half of households with someone age 65 or older receive 50% or more of their total income from Social Security, according to data analyzed by the Social Security Administration. Getting every penny from the program is essential to millions of people.
There are only a couple of factors in your control when it comes to maximizing your Social Security benefit in retirement: how much you earn in your career and when you claim your benefits. But even if your career earnings are very high, there's still a big difference between what you'll receive from Social Security depending on whether you claim at 62, 66, or 70. Looking at the differences between the maximum possible benefit at each of those ages makes that very clear.
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Here's exactly how much you need to earn to maximize Social Security
In order to qualify for the maximum Social Security benefit, you'll need to earn a high salary for several decades.
When it comes time to calculate your monthly benefit, the Social Security Administration will take a look at your earnings throughout your career. It adjusts past years' earnings based on historic wage growth, so what you earned 20 or 30 years ago is comparable to what you earned this year. It then selects your highest 35 years of earnings and uses them to calculate your monthly average income.
That number is the key to determining your primary insurance amount. That's the amount you receive by claiming benefits at your full retirement age. If you claim before reaching full retirement age, you'll receive less than your primary insurance amount. Claim later, and you'll receive more.
But not every dollar you earn will always count toward your average income calculation. That's because the Social Security Administration puts a cap on the amount of taxable earnings every year called the "contribution and benefit base." That amount is adjusted for rising average wages each year. For 2024, the contribution and benefit base is $168,600.
Earning more than the contribution and benefit base for 35 years is necessary to put you in line to receive the maximum possible benefit from Social Security. While only about 6% of workers will exceed that base in any given year, a much smaller percentage will consistently earn more than that amount for at least 35 years.
For reference, here's how the contribution and benefits base has changed in the last 50 years.
| 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, 66, and 70
Even if you've earned above the maximum taxable earnings for 35 years during your career, you'll still see a significant difference in your monthly benefit depending on when you claim.
You can claim Social Security retirement benefits at as early as 62 years old. As mentioned, though, claiming before your full retirement age will result in a benefit smaller than your primary insurance amount. Your full retirement age will fall between 66 and 67 depending on when you were born. In 2024, retirees born in 1957 and 1958 will reach their full retirement age at 66 and 6 months (if they haven't already) and 66 and 8 months, respectively.
You'll maximize your monthly benefit by delaying until age 70. There's rarely any benefit to waiting past age 70, as the Social Security Administration won't increase your monthly benefit any further.
So, most retirees are trying to decide between claiming as soon as possible, waiting until their full retirement age around 66 years old, or maxing out their monthly benefit at age 70. Here's what the maximum monthly benefit looks like at each of those ages in 2024.
| Retirement Age | 62 | 66 | 70 |
|---|---|---|---|
| Maximum monthly benefit | $2,710 | $3,652 | $4,873 |
Data source: Social Security Administration.
As you can see, the 70-year-old claiming the maximum benefit in 2024 receives $58,476 in annual income from Social Security alone. The 62-year-old brings in just $32,520. One could completely replace the average individual income while the other will likely require other retirement savings to cover necessary expenses in retirement.
Is it worth waiting?
If you earned enough in your career to qualify for the maximum possible Social Security benefit, you likely managed to save a good chunk of your earnings in various retirement accounts.
You may be tempted to claim Social Security early, so you don't have to withdraw as much from your own savings. You likely know the longer you keep your money invested, the more wealth you can accumulate. Plus, it may be nice to have a larger nest egg to pass on as an inheritance.
But claiming early comes at the cost of a guaranteed return. Every month you delay taking Social Security benefits, your benefits check increases by a little bit. If you wait until 70, your check will be about 77% bigger than if you claim at age 62. What's more, that's an inflation-adjusted return, since Social Security receives a cost-of-living adjustment every year. In other words, it's a guaranteed 7.4% annual real return.
By comparison, the S&P 500 historically averages 6.5% real total returns. Those returns are far from guaranteed and come with a lot of volatility. Plus, you'll likely hold a good amount of bonds in your portfolio during retirement, which have a lower expected return. All this is to say delaying Social Security is often a better "investment" for your retirement account than stocks or bonds.
Image source: Getty Images.
There are some downsides to delaying benefits. You can't pass on your benefits to your heirs, and you may not live long enough to make delaying worthwhile in the long run. But those downsides are usually made up for by the upsides, especially if you live well into your golden years.
Numerous data sources suggest waiting until 70 is the optimal decision if you can afford to do so. A 2019 study from United Income found 57% of retirees would maximize their wealth in retirement by waiting until age 70. A paper published by the National Bureau of Economic Research suggests 90% of retirees would be better off delaying benefits until 70. And the CDC's life expectancy data suggests the majority of retirees would collect more in lifetime income from Social Security by delaying until 70.
So, whether you're in line to get the maximum possible benefit or not, it pays to delay.
