Here’s the Biggest Social Security Benefit Retirees Can Get at Ages 62, 66, and 70

The Nationwide Retirement Institute reports that only 8% of surveyed adults can identify all the factors that determine the maximum Social Security benefit. That is problematic because Social Security is often the largest source of income in retirement, meaning benefits ultimately have a substantial impact on living standards for millions of Americans

Read on to learn what retired workers must do to earn the maximum benefit and to see the biggest Social Security payout at ages 62, 66, and 70.

Image source: Getty Images.

How Social Security benefits are calculated for retired workers

The Social Security Administration uses three variables to calculate benefits for retired workers: (1) work history, (2) lifetime earnings, and (3) claiming age.

The first step is determining the primary insurance amount (PIA). That happens at age 62, when workers become eligible for retirement benefits, but the PIA is recalculated each year thereafter to account for continued work. Specifically, a formula is applied to the inflation-adjusted earnings from the 35 highest-paid years of employment to determine the PIA. The PIA is the benefit a worker will receive if they file for Social Security at full retirement age.

The second step is adjusting the PIA for early or delayed retirement. Workers who start Social Security before full retirement age get a smaller payout for life, meaning they get less than 100% of their PIA. But workers who start Social Security after full retirement age get a bigger payout, meaning they get more than 100% of their PIA.

How retired workers earn the maximum Social Security benefit

Now that we’ve talked about how Social Security benefits are calculated, we can talk about how Social Security benefits can be maximized. So, let’s revisit the three variable in the previous section.

  • Work history: The benefits formula includes income from the 35 highest-paid years of work. That means workers must spend at least 35 years in the workforce to have any hope of getting the maximum benefit. Workers who spend fewer than 35 years in the workforce will have zeros factored into the formula, which will make them ineligible for the biggest payout.

  • Lifetime income: Only income up to the maximum taxable earnings limit is included in the benefits formula. That means workers must have earnings equal to (or greater than) the taxable maximum for at least 35 years to get the biggest Social Security benefit. The taxable maximum typically increases each year to keep pace with wages, but it would be equivalent to $168,600 in 2024 dollars.

  • Claiming age: Workers that claim Social Security benefits after full retirement age earn delayed retirement credits that increase their payments by 2/3 of 1% per month, or 8% per year. But delayed retirement credits stop accumulating at age 70, meaning workers must claim Social Security at age 70 to earn the largest possible benefit.

Claiming age is a particularly consequential variable. To illustrates why, the chart below shows the maximum monthly Social Security benefit for retired workers at different claiming ages in 2024.

Claiming Age in 2024

Maximum Social Security Benefit

62

$2,710

65

$3,426

66

$3,652

Full Retirement Age

$3,822

67

$3,911

70

$4,873

Data source: Social Security Administration. Some workers born in late 1957 will reach FRA this year at 66 years and 6 months, and some workers born in early 1958 will reach FRA this year at 66 years and 8 months.

Readers should zero in on the maximum Social Security benefit at ages 62, 66, and 70. Those three data points stand out because 62 is the earliest possible claiming age, 70 is the latest sensible claiming age, and 66 provides a data point in the middle. Specifically, retirees who start Social Security this year will get up to $942 more per month if they claim at age 66 rather than age 62. And they will get up to $2,163 more per month if they claim at age 70 rather than age 62.

The odds of qualifying for the maximum Social Security benefit are slim

Very few Americans will qualify for the maximum Social Security benefit. Indeed, just 7% of workers had income above the taxable maximum in 2022. However, the concepts covered in this article can still help workers earn a bigger benefit.

For instance, working for at least 35 years will ensure no zeros are factored into the PIA calculation. In addition, staying in the workforce beyond the 35-year mark would be helpful for workers who had one or more low-earning years during their careers, provided they make enough money in the current year to replace one of the low-earning years.

Additionally, delaying Social Security until age 70 can dramatically increase the payout. The precise dollar amounts will vary based on other variables, but a worker born in 1960 or later could increase their benefit by 33% by claiming at age 66 rather than age 62. That same worker could increase their benefit by 77% by claiming at age 70 as opposed to age 62.

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Here’s the Biggest Social Security Benefit Retirees Can Get at Ages 62, 66, and 70 was originally published by The Motley Fool