According to the Social Security Administration (SSA), the maximum Social Security benefits that an individual who files a claim for Social Security retirement benefits in 2021 can receive per month is:
- $3,895 for anyone who files at age 70
- $3,113 for someone filing at full retirement age (FRA)
- $2,324 for anyone 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 age 62, the maximum amount is $2,324.
- The maximum full Social Security benefit a person can receive per month in 2021 is $3,895, and you must file at age 70 to receive it.
how social security works
Qualifying for Social Security in the first place requires 40 work credits, or about 10 years of work. If you have 40 work credits, you’re eligible to claim Social Security once you reach age 62. However, your FRA depends on your year of birth.
For example, if you were born in 1960 or later, your FRA is 67; If you were born between 1943 and 1954, that’s 66. If you wait to claim your FRA, you will receive 100% of your benefits. If you claim earlier, you will get less. If you claim at the age of 70, you get an 8% bonus for each year you delay claiming.
Social Security benefits are calculated by combining your 35 highest-paying years (if you worked for more than 35 years). First, all wages are indexed for inflation. Previous years’ wages are multiplied by a factor based on the year in which each salary was earned and the year the claimant reaches the age of 60. This calculation gives an amount equal to the purchasing power based on the current value of the dollar. Accounting for this valuation change is significant, as the $14,000 salary was far more impressive in 1954 than it is today.
Once all wages have been indexed, average indexed monthly income (AIME) is calculated by dividing the sum of all indexed wages by 420 (35 years expressed as months). If you have worked less than 35 years, then zero is recorded for the years you did not work. The benefit amount is then calculated based on factors that include the year in which collections begin, whether the claimant has reached FRA, and whether the claimant continues to work while collecting benefits.
Social Security is designed to replace about 40% of your pre-retirement income. To ensure that benefits maintain their purchasing power, the Social Security Administration adjusts them each year according to changes in the cost of living, for example, through January 2022, through COLA Social Security and Supplemental Security Income (SSI). would increase the benefits of 5.9%.
Maximum Social Security Benefit Example
Let’s say someone who turns 62 in 2021 will reach FRA at 66 years and 10 months, whose income qualifies them for a monthly benefit of $1,000 at that time. According to the Social Security Administration, opting to receive benefits at age 62 will reduce their monthly benefit by 29.2% to $708, so they can continue to receive benefits for a longer period of time. That reduction is usually permanent.
If the same person waits to receive benefits until age 70, the monthly benefit increases to $1,253. The large amount is due to delay in the accrued retirement credit for the decision to defer receiving benefits before FRA. In this example, that higher amount at age 70 is about 77% more than the benefit they’d receive each month starting at age 62, or a difference of $545 each month.
A Social Security Administration calculator can give you more personal information. Of course, the best time for someone to start taking Social Security benefits depends on many factors, not just the dollar amount. Things like current income and employment status, other available retirement funds, and life expectancy should also be factored into the decision.
Marguerita M. Cheng, CFP®, CRPC®, RICP, CDFA
CEO of Blue Ocean Global Wealth, Gaithersburg, Mo.
According to the Social Security Administration (SSA), the maximum monthly benefit that can be paid at full retirement age (FRA) in 2021 is $3,113. Keep in mind that this is the maximum benefit in an FRA, but you can defer your benefits and increase your Social Security benefit. Here are some examples:
- Julia Child retires and delays claiming benefits beyond her FRA by two years. He would get a monthly profit of 16% more than his Primary Sum Assured (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 beyond his FRA by four years. He will get monthly profit which is 32% bigger than his PIA: (2/3) x 48 = 32%. By deferring his benefits, James permanently increased his $1,600 FRA benefit to $2,112.