Even if you’re at the maximum retirement benefit level, your claiming age still makes a big difference.
If you’ve had a long, well-paid career, you may be able to collect the maximum Social Security benefits when you retire. But even if you qualify for the maximum retirement check, the age at which you apply can have a big impact on the size of your final check.
There is a big difference in the maximum amount of retirement benefits for someone who claims as soon as possible at age 62 and someone who waits until their benefits are fully paid at age 70. Those who wait until full retirement age, around age 67, may find some compromise. Between the extremes.
The difference in the maximum check amount you’ll receive each month at each of these ages shows how valuable it is to delay benefits as much as possible.
Image source: Getty Images.
If you want the maximum Social Security benefits, the salary you need is:
The first step to making the most of your Social Security retirement benefits is earning a high income during your career.
The Social Security Administration (SSA) collects your earnings history from your entire career when calculating your monthly retirement benefits. This adjusts your income in each year before you reach age 60 to equal your income in the year you turn 60. Earnings thereafter are not adjusted. Next, select your 35 highest-earning years and calculate the average monthly income you received during those years.
That average income is factored into the Social Security benefit formula to determine the Principal Insurance Amount (PIA). PIA is the amount you would receive if you applied for Social Security benefits in the month you reach your full retirement age (FRA). FRA ranges from age 66 to 67, depending on when you were born. If you claim before FRA, your benefits will be smaller than PIA. You can also delay benefits until age 70 and receive a larger check as a result.
There are important pitfalls for high-income earners. SSA may not count all of your income. If your wages exceed an annual limit called the “contribution and benefit threshold” or “maximum taxable income,” SSA replaces that limit with your actual earnings on your earnings record. That’s because Social Security taxes are not paid on income above that limit. The 2024 cap is $168,600.
If you earned more than the 35-year maximum taxable income during your career, you’re more likely to receive the maximum Social Security benefit when you retire. The maximum taxable income for the past 50 years is:
Annual revenue Annual revenue 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 7,900 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 $106, 800 1985 $39,600 2010 $106,800 1986 $42,000 2011 $106,800 1987 $43,800 2012 $110,100 1988 $45,000 2013 $113,70 0 1989 $48,000 2014 $117,000 1990 $51,300 2015 $118,500 1991 $53,4 00 2016 $118,500 1992 $55,500 2017 $127,200 1993 $57,600 2018 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.
The maximum Social Security benefits at ages 62, 67, and 70 are as follows:
One of the most important decisions you’ll face in retirement is when to claim your Social Security benefits. Even if you reach your maximum earning potential during your career, it can still be difficult to determine the best age to make a personal claim.
Claiming at age 62 gives you a good deal of up-front health checks, but you’ll probably need to supplement your Social Security income with your personal retirement savings. On the other hand, some people may not see the value in waiting eight years until age 70 to start receiving larger benefits. Many retirees choose to claim the difference in installments once they reach FRA, which for many readers is age 67.
The maximum benefits for each age in 2024 are as follows:
Retirement age 62 67 70 Maximum monthly benefit $2,710 $3,911 $4,873
Data source: Social Security Administration.
Even though 70-year-olds and 62-year-olds earned similar salaries throughout their careers, 70-year-olds end up receiving monthly benefit checks that are nearly 80% higher than younger people. The total difference is approximately $26,000 per year. This is enough money for maybe two very nice vacations a year.
A small portion of the difference in amounts is due to the change in full retirement age, which is partially offset by the factors used to determine the PIA for each age group. Still, people who turned 62 this year could increase their monthly benefits by up to 77% by deferring until age 70.
Is it worth the wait?
If you’re in line to receive the largest Social Security check possible, waiting until you’re 70 to claim benefits may be a wise decision.
First, you probably have plenty of retirement savings from a well-paid career. Even if you have to stretch your withdrawal rate a little to enjoy early retirement, it’s worth knowing you’ll get a larger extra check.
Another important consideration is survivor benefits. If you die before your spouse, your spouse is entitled to receive what you were receiving from Social Security. As a result, your joint life expectancy tilts your chances of getting more income from Social Security over your lifetime toward delaying it for as long as possible.
If you retire with significant assets, you may also receive tax benefits by delaying Social Security payments until age 70. The early years of retirement are a great time to position your retirement assets to reduce your taxable income over the long term through strategies like the Roth. Conversion and Capture of Capital Gains. It’s even more difficult if you have a steady income from Social Security.
Even if you don’t receive the maximum Social Security benefit (yet), it often makes sense to delay benefits until age 70. A 2019 analysis from United Income found that 57% of retirees would maximize their retirement assets by waiting. Make your point for as long as possible. Only 6.5% of retirees end up richer by claiming benefits before age 64. If you can afford to wait several years before claiming Social Security benefits, it’s often worth the delay, no matter how large your benefits are.
