Today’s Social Security column addresses questions about whether there’s a universal maximum Social Security benefit each year, when to start benefits to avoid the effects of the earnings test and the availability of spousal benefits for those born after 1954. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc.
See more Ask Larry answers here.
Have Social Security questions of your own you’d like answered? Ask Larry about Social Security here.
Why Don’t I Get The Maximum Social Security Retirement Benefit Based On My Income?
Hi Larry, I recently applied to start receiving my Social Security retirement benefits at 70. Per My Social Security account, I earned the Social Security maximum taxable income in 40 of the years I worked and so I of course paid the maximum Social Security taxes.
Yet the notice of award I received from SSA states my monthly benefit before Medicare premium deductions will be $3,798.50. But I’ve read online that the maximum benefit for 2022 is over $4,000 and I assume I’m qualified to receive it based on my income.
Can you help me understand why I did not receive the maximum benefit? Thanks, Nolan
Hi Nolan, Simply put, there is no such thing as a “maximum Social Security benefit amount.” Anyone who claims there is a universal maximum that applies to everyone of every age is misinformed.
Social Security retirement benefits are based on an average of a person’s highest 35 years of Social Security covered wage-indexed earnings, and the indexing factors used to calculate a person’s benefit rate are different for each calendar year of birth.
So when you read something about a maximum benefit rate, they are likely referring to the maximum possible amount that someone with a particular year of birth could receive at a given point in time.
Furthermore, the maximum benefit rate for each calendar year of birth changes after every year. If a person continues to work and pay into Social Security, they can keep increasing their benefit rate indefinitely.
Therefore, there really is no maximum benefit rate, there is only a maximum amount that each person could possibly be paid in a given year based on their year of birth, their earnings history, and when they started drawing their benefits.
I don’t know what source you’re quoting when you refer to a maximum benefit amount, but if you’ve a) paid Social Security taxes on the the maximum amount of earnings subject to Social Security taxes in each of your highest 35 years of income and b) if you waited until 70 to start drawing your benefits and c) if Social Security has all of your earnings correctly credited including last year, then you should be eligible for the highest possible monthly benefit rate that a person born in the same calendar year as you could currently receive. Best, Larry
What Month Can I Start My Retirement Benefits And Continue To Work With No Reduction In Benefits?
Hi Larry, I’ll be 66 in June and I’m still working with a high income. What month should I start my retirement start if I want to continue to work with no reduction in benefits? Thanks, Julie
Hi Julie, You could claim your benefits as early as October 2022 without losing any benefits due to the Social Security earnings test. Full retirement age (FRA) for people born in 1956 is 66 and four months and the earnings test is no longer applied once you reach FRA.
If you start drawing your benefits in October, your benefit rate will be equal to 100% of your primary insurance amount (PIA). But, you could wait until as late as 70 to start collecting your Social Security retirement benefits, and for each month from FRA until age 70 that you don’t collect benefits your benefit rate would increase by 2/3rds of 1%.
So if you waited all the way until 70 to start drawing your retirement benefits, your monthly benefit rate would be equal to roughly 1.2933 times your PIA. Or, in other words, waiting until age 70 to start collecting would raise your benefit rate by 29.33%.
Your best filing strategy depends on a number of different factors, so you may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to ensure your household receives the highest lifetime benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry
What Is The Correct Policy For Receiving Spousal Benefits?
Hi Larry, My husband is 66 and started receiving Social Security in February. When we applied, we discussed with a Social Security rep the possibility of me receiving a spousal benefit based on his account.
When I called to apply for my spousal benefit, I was told I couldn’t get it because I was not born before 1954. I was told that the law changed a couple years ago and those of us born after 1954 are not eligible for spousal benefits. Is this true?
Can you please tell me what is the correct policy receiving spousal benefits? We plan for me to delay my filing until I turn 70. Thanks, Maria
Hi Maria, Only people born prior to January 2 1954 are allowed to apply just for spousal benefits without also being required to apply for their own Social Security retirement benefits at the same time.
So assuming that you were born after 1954, there’s no way that you could draw only your spousal benefits while letting your own retirement benefit rate grow until 70. The above change in Social Security’s law was passed by Congress as the Bipartisan Budget Act of 2015. Best, Larry