According to the Social Security Administration (SSA), the maximum Social Security benefit that an individual who files a claim for Social Security retirement benefits in 2021 can receive per month is as follows:
- $3,895 for someone who files at age 70
- $3,113 for someone who files at full retirement age (FRA)
- $2,324 for someone who files at age 62
- Qualifying for Social Security at age 62 requires 10 years of work or 40 work credits.
- For someone at full retirement age, the maximum amount is $3,113, and for someone aged 62, the maximum amount is $2,324.
- The absolute Social Security max benefit that an individual can receive per month in 2021 is $3,895, and to get it you must file at age 70.
How Social Security Works
Qualifying for Social Security in the first place requires 40 work credits or approximately 10 years of work. If you have 40 work credits, you are eligible to claim Social Security once you reach age 62. Your FRA, however, depends on the year of your birth.
For example, if you were born in 1960 or later, your FRA is 67; if you were born between 1943 and 1954, it is 66. You will receive 100% of your benefits if you wait until your FRA to claim them. If you claim earlier, you will receive less. If you claim at age 70, you get an 8% bonus for each year that you delayed claiming.
Social Security benefits are calculated by combining your 35 highest-paid years (if you worked for more than 35 years). First, all wages are indexed to account for inflation. Wages from previous years are multiplied by a factor based on the years in which each salary was earned and the year in which the claimant reaches age 60. This calculation gives an amount comparable to buying power based on the current value of the dollar. Accounting for this valuation change is important, because a salary of $14,000 was far more impressive in 1954 than it is today.
Once all wages have been indexed, the average indexed monthly earnings (AIME) is computed by dividing the sum of all indexed wages by 420 (35 years expressed as months). If you worked fewer than 35 years, a zero is entered for years you did not work. The benefit amount is then calculated based on factors that include the year in which collection begins, whether the claimant has reached FRA, and whether the claimant continues to work while collecting benefits.
Social Security is designed to replace approximately 40% of your pre-retirement income. To ensure benefits maintain their buying power, the Social Security administration adjusts them every year in accordance with changes in the cost of living, For example, as of January 2022, the COLA will cause Social Security and Supplemental Security Income (SSI) benefits to increase 5.9%.
Maximum Social Security Benefits Example
Say that someone who turns 62 in 2021 will reach FRA at 66 years and 10 months, with earnings that make them eligible at that point for a monthly benefit of $1,000. Opting to receive benefits at age 62 will reduce their monthly benefit by 29.2% to $708 to account for the longer time they could receive benefits, according to the Social Security Administration. That decrease is usually permanent.
If that same individual waits to get benefits until age 70, the monthly benefit increases to $1,253. The larger amount is due to the delayed retirement credits earned for the decision to postpone receiving benefits past FRA. In this example, that higher amount at age 70 is about 77% more than the benefit they would receive each month if benefits started at age 62, or a difference of $545 each month.
A Social Security Administration calculator can give you more personalized information. Of course, the best time for someone to start taking Social Security benefits depends on a variety of factors, not just the dollar amount of the benefit. Things such as current income and employment status, other available retirement funds, and life expectancy must also be factored into the decision.
Marguerita M. Cheng, CFP®, CRPC®, RICP, CDFA
CEO of Blue Ocean Global Wealth, Gaithersburg, Md.
According to the Social Security Administration (SSA), the maximum monthly benefit paid at full retirement age (FRA) in 2021 is $3,113. Bear in mind that this is the maximum benefit at FRA, but you can defer your benefits and increase your Social Security benefit. Here are some examples:
- Julia Child retires and delays claiming benefits two years beyond her FRA. She will receive a monthly benefit 16% larger than her primary insurance amount (PIA): (2/3) x 24 = 16%. By deferring her benefits, Julia permanently increased her $1,400 FRA benefit to $1,624.
- James Brown retires and delays claiming benefits four years beyond his FRA. He will receive a monthly benefit that is 32% larger than his PIA: (2/3) x 48 = 32%. By deferring his benefits, James permanently increased his $1,600 FRA benefit to $2,112.