What’s the most you can receive from Social Security? The answer is…it depends on your age, your work history, your marital status, and your retirement decisions.
Let’s start with answering the immediate questions about the maximum Social Security benefits payable in 2024, then we’ll explore how you can maximize your Social Security benefits.
What Is The Maximum Social Security Benefit Available?
The highest Social Security retirement benefit for an individual starting benefits in 2024 is $4,873 per month, according to the Social Security administration. This amount will be paid to workers who delay starting their Social Security benefits until they reach age 70 in 2024 and have earned the maximum pay that’s covered by Social Security for 35 years (more on this subject later in this post).
This maximum age-70 amount has increased substantially over the 2023 amount of $4,559 per month.
Instead of attaining age 70 in 2024, suppose you reach your “full retirement age” in 2024 (age 66 and 8 months) and decide to start your Social Security benefits. Your monthly retirement benefit would be $3,822 per month. Again, this assumes you earned the maximum pay that’s covered by Social Security for 35 years.
As you can see, the term “full retirement age” is misleading, since it isn’t the age at which you’ll receive the highest Social Security benefit.
How Is The Maximum Social Security Benefit Calculated?
To understand how Social Security benefits are calculated and how to maximize your benefit, you’ll need to understand a few terms. Warning: commonly used, alphabet-soup acronyms ahead!
Social Security has a complex benefit formula that calculates your “primary insurance amount” (PIA) at your full retirement age (FRA). If you actually start your retirement income at your FRA, then your monthly retirement benefit will equal your PIA.
One input to the benefit formula is the average amount of your income that’s been covered by Social Security, averaged over 35 years. This average is known as your “average indexed monthly earnings” (AIME). The higher your AIME, the higher your PIA and income will be.
The maximum amount of your earnings that are counted each year towards your AIME is called the “Social Security Wage Base” (SSWB). It increases every year, and for 2024, it equals $168,600. The SSWB is also the maximum amount that is taxed for Social Security purposes.
If you had covered earnings for more than 35 years, the calculation of the AIME chooses the earnings to give you the highest average. If you had covered earnings for fewer than 35 years, then the AIME calculation will fill in “zero earnings” for every year under 35 in which you didn’t have earnings.
Your FRA depends on your year of birth and is age 66 if your birth year is between 1943 and 1954. Then it increases by two months for each subsequent birth year until reaching age 67 for people who were born in 1960 and after.
The age at which you start your Social Security retirement income also impacts the amount of your monthly benefit. If you retire before your FRA and begin taking benefits, then your monthly benefit will equal your PIA, reduced by a percentage for each month your benefit starts before your FRA (age 62 is the earliest starting age).
If you delay starting benefits until after your FRA, then your monthly benefit will equal your PIA, increased by delayed retirement credits for each month of delay (but the delayed retirement credits max out when you reach age 70).
How Can You Get The Maximum Social Security Benefit?
Let’s apply the rules described above to understand how you can earn the highest Social Security benefit. The most powerful action most people can take to do this is to delay the start of benefits until age 70; this way, they receive the most delayed retirement credits.
Next, check the calculation of your AIME. One requirement to maximize your Social Security benefit is to earn at least the SSWB every year for 35 years. If you have less than 35 years of covered earnings, you’ll want to work a few more years to eliminate any years that result in zero earnings in the calculation of your AIME. If you have more than 35 years of covered earnings but some years were low, you can also increase your AIME by working a few more years at a higher covered salary.
How Else Can You Maximize Your Social Security?
So far, we’ve just talked about how individuals can receive the largest possible monthly Social Security retirement income. Each member of a married couple also receives his or her own Social Security benefit. If both spouses want the highest possible benefit, they could try to max out their own earned benefit using the strategies mentioned previously.
But there’s another dimension to maxing out your Social Security benefit, and that’s maximizing the total income you’d expect to receive over your lifetime, including your spouse’s if you’re married. These strategies find the optimal age at which to start Social Security benefits so you can maximize the expected lifetime income you (or you and your spouse) can expect to receive. This calculation is best left to a computer.
There are several Social Security optimizing calculators available on the internet. My favorite is Open Social Security, which is free. All you need to do is input your birth year, your spouse’s birth year if you’re married, and both of your PIA amounts. The system then describes the optimal strategy.
You can also use calculators on Social Security’s website to estimate your PIA and benefits at various starting ages, which can help you determine how to maximize your benefits.
It can take an afternoon or two to understand Social Security’s rules, estimate your benefits, and determine a strategy that will maximize your benefits. Given what’s at stake, however, you could be earning hundreds or even thousands of dollars per hour, just by doing your Social Security homework.