What is the maximum amount you can receive from Social Security? The answer…depends on your age, work history, marital status, and your decision to retire.
We’ll start by answering the immediate question about the maximum amount of Social Security benefits that will be paid in 2024, and then we’ll look at how to maximize your Social Security benefits.
What is the maximum amount of Social Security benefits available?
According to the Social Security Administration, the maximum amount of Social Security retirement benefits for individuals who begin receiving benefits in 2024 is $4,873 per month. This amount will be paid to the worker who has earned the highest wage covered by Social Security for 35 years, delaying the start of Social Security benefits until he reaches the age of 70 in 2024 (more on this later). Masu).
This 70-year-old cap amount is a significant increase from the $4,559 per month in 2023.
Let’s say that instead of reaching age 70 in 2024, you decide to reach “full retirement age” (66 years and 8 months) in 2024 and start collecting Social Security benefits. Your monthly retirement benefit will be $3,822 per month. Again, this assumes you have earned the maximum salary covered by Social Security for his 35 years.
As you can see, the term “full retirement age” is misleading. This is because you are not at the age to receive the highest Social Security benefits.
How is the maximum Social Security benefit calculated?
To understand how Social Security benefits are calculated and how to maximize your benefits, you need to understand a few terms. Warning: A commonly used alphabet soup acronym precedes you.
Social Security has a complex benefit formula that calculates your “Primary Insurance Amount” (PIA) at Full Retirement Age (FRA). In fact if he starts his retirement income from FRA, his monthly retirement income will be equal to his PIA.
One of the inputs to the benefit formula is the average amount of income covered by Social Security (averaged over 35 years). This average is known as the “Average Monthly Earnings Index” (AIME). The higher the AIME, the higher the PIA and income.
The maximum amount of income that counts toward AIME each year is called the “Social Security Wage Base” (SSWB). This increases each year to $168,600 in 2024. The SSWB is also the maximum amount that can be taxed for Social Security purposes.
If you have covered your income for more than 35 years, the AIME calculation chooses the income that gives you the highest average. If you covered less than 35 years of income, the AIME calculation will enter “zero income” for all years before age 35 for which she had no income.
Your FRA depends on your year of birth and is 66 years old if your birth year is between 1943 and 1954. Thereafter, FRA increases by two months for each subsequent year of birth until he reaches age 67 for those born after 1960.
The age at which you begin collecting Social Security retirement benefits also affects the amount of your monthly benefits. If you retire and begin collecting benefits before FRA, your monthly benefit is equal to your PIA, reduced by a percentage for each month benefits begin before FRA (age 62 is the earliest age).
If you delay the start of benefits until after FRA ends, your monthly benefit amount is equal to your PIA, plus a delayed retirement credit for each month of delay (but the delayed retirement credit is maximized once you reach age 70).
How can I maximize my Social Security benefits?
Apply the rules above to understand how to get the best Social Security benefits. The strongest action most people can take to do this is to delay the start of benefits until he is 70 years old. This way, you will receive the most delayed retirement credits.
Next, check the AIME calculation. One of the requirements to get the most out of your Social Security benefits is to earn at least SSWB every year for 35 years. If you have less than 35 years of qualifying income, you may want to work a few more years and exclude the years where your income would be zero in your AIME calculation. If you have more than 35 years of qualifying salary and some years were low, you can also increase your AIME by working a few more years at a higher qualifying salary.
How else can you get the most out of Social Security?
So far, we have discussed how individuals can receive the maximum possible Social Security retirement benefits each month. Each member of the couple also receives their own Social Security benefits. If both spouses want the best possible benefits, they can use the strategies described above to try to make the most of the benefits they themselves have earned.
But there’s another side to getting the most out of your Social Security benefits. total The income you expect to receive over your lifetime (including your spouse’s income if you are married). These strategies can help you find the best age to start collecting Social Security benefits and maximize the lifetime income you (or you and your spouse) can expect to receive. This calculation is best left to the computer.
There are several Social Security optimization calculators available on the Internet. My favorite is the free Open Social Security. All you need to do is enter your year of birth, your spouse’s year of birth if married, and the PIA amount for both of them. The system then describes the optimal strategy.
You can also use the calculator on Social Security’s website to estimate your PIA and benefit amounts at various starting ages. This will help you decide how to maximize your benefits.
It may take an afternoon or two to understand Social Security rules, estimate your benefits, and decide on a strategy to maximize your benefits. But given what’s at stake, you could potentially make hundreds or even thousands of dollars an hour just by doing your Social Security homework.
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