What Is The Maximum Social Security Benefit?

If you’re in the process, or considering filing for Social Security benefits, you’re most likely wondering what is the maximum social security benefit for retirement you can receive. 

In short, it all depends on the age when you begin collecting these funds, as well as your overall earning history. 

Since matters regarding retirement benefits are often complex to figure out, here’s a nifty guide that will provide you with everything you need to know.

Social Security retirement benefit amount 2023

Since you’re asking what is the maximum social security benefit, here’s a quick answer:

At the time of writing the maximum amount is $3,627 per month. It’s important to note that this only applies to individuals who file for retirement at the full retirement age, which is currently set at 66.

But what if you qualify and delay claiming benefits until you’re older? In that case, the answer to what is the maximum social security benefit is $4,555. 

How are Social Security benefits determined

Generally speaking, to qualify for social security, you need to have at least 40 work credits, this translates into roughly ten years of work. To be eligible for the maximum amount, one of the requirements (along with the age) is earning a maximum taxable income for approximately 35 years.

At the time of writing the cap on the amount of earnings subject to taxation by Social Security is $160k, which is a significant increase when compared to the previous year when it was set at $147k.

The amount of benefits is typically calculated by adding up an individual’s 35 years with the highest earnings. All earnings will be indexed to account for inflation, and the wages from years prior will be multiplied by a factor that amounts to the years during which they were earned. 

This calculation provides you with an amount that is equivalent to the buying power in accordance with the current market value of the dollar. 

Why does this matter?

Simple - a salary of $20k was impressive in the fifties, but today, it’s nothing to talk much about. 

Once the wage indexing is completed, Social Security experts will calculate the average indexed monthly earnings. This calculator involves dividing the sum of wages by 420 which is 35 years. If you failed to meet the 35-year mark, Social Security will add a zero for each year that you were unemployed. 

The final calculation will also account for factors such as the year when the collection began, whether you wish to stay employed while receiving benefits, and whether you have reached your full retirement age.

If you managed to amass 40 work credits, you can claim benefits as early as age 62. However, it’s better to wait until the full retirement age to receive a much higher amount. In 2023, the absolute highest benefit you can receive at 62 is slightly over $2,5k. 

It’s worth noting that the full retirement age will depend on the date of your birth.

For those born in 1960 or later, the full retirement age is set at 67 while for those born between 1943 and 1954, it’s 66.

So for instance, if you wait to claim benefits until your full retirement age, you’ll receive 100% of your benefits. Whereas, if your full retirement age is 66 and you make a claim at 70, you’ll receive an 8% bonus for each year that you were employed after you reached the age of full retirement.

How to maximize your social security benefits

Not many people end up receiving the maximum amount of retirement benefits. To bag the $4,5k we talked about earlier, you need to delay your retirement by a few years while also being a high earner for multiple decades.

Still, if you want to maximize your benefits, you should try to meet the following criteria.

You must earn at least the maximum taxable wage for over 35 years. Since Social Security will take into account your highest-paid years while coming up with your average benefits. In other words, you need to contribute the maximum amount, which will be adjusted for the national average wage index over your lifetime. 

Furthermore, you can also spend a few more years employed to increase the amount of benefits. Even though you can retire at the age of 62, pushing yourself for another eight years may be worth it when you consider you’ll maximize your benefits. 

Here’s how you should look at it.

Let’s say someone who turned 62 in 2021 reaches their full retirement age at 66 and a few months and retiring at their retirement age makes them eligible for $1k. If they choose to retire at 62, they’ll only be receiving $700. 

If the same person chose to retire at 70, their benefits would increase to $1,25k. In other words, they have maximized their benefits by 77% in comparison if they retired as soon as they were eligible.

Naturally, you also have to go past just the sheer amount of benefits when determining the right time to retire. You should also think of any other retirement funds, your current employment, as well as your health status and life expectancy. 

What is the average social security payment?

Along with asking what is the maximum social security benefit, it also doesn’t hurt to be familiar with the average payment. At the time of writing, data from the Social Security Administration reveals the average payment is slightly higher than $1.6k  per month. 

Regardless, to maintain the same standard and buying power, the amount is adjusted each year to account for shifts in costs of living. For example, the benefits were increased by 8.7% for 2023, and will most likely rise next year too. 

Patience is a virtue

While going for an early retirement certainly seems enjoyable, if you do everything in your power now, you can secure a higher retirement payment later. Considering that working past your retirement age may provide you with an amount that’s over 70% larger later, postponing your retirement makes perfect financial sense. 

Whatever you choose to do, you need to keep your best interests in mind and you’ll be fine. Good luck!

Note: 

The information in this blog post is for reference only and not legal advice. As such, you should not make legal decisions based on the information in this blog post. Moreover, there is no lawyer-client relationship resulting from this blog post, nor should any such relationship be implied. If you need legal counsel, please consult a lawyer licensed to practice in your jurisdiction.