What is the Maximum Social Security Benefit You Can Receive?

If you've been paying into Social Security for most of your life, you can expect to collect those benefits when you retire. The big question is, what is the maximum social security benefit you can receive?

We'll explore that here: The answer is not cut-and-dry. Your benefits vary depending on your retirement age, how much you paid into it, and how long you paid into it. The IRS has a benefits calculator, and you can sign up to receive your statements, but in lieu of those options, read on for some basic information you can use.

Maximum Social Security Benefit

Some Light History

The Social Security Act eased American poverty in old age. Franklin Roosevelt signed the act in 1935, and it has since lowered the senior citizen poverty rate from 50 percent to ten percent. Social Security makes up about a third of elderly income in the U.S., with millions of retirees dependent on the program.

Who is Eligible for Social Security?

People who work and pay social security tax earn credits which are the building blocks of Social Security benefits. The agency requires people to earn four credits per year. In 2019, $1,360 is worth one credit, and $5,440 earns a worker the four credits needed to qualify for the year.

The minimum number of credits to earn Social Security benefits is 40, or ten years of work for anyone born after 1929. People born before 1929 need fewer years of work, calculated by how many years before 1929 they were born.

How Does the Social Security Administration Calculate Benefit Amounts?

The Social Security Administration (SSA) figures your benefits using a three-step process based on your work record. That baseline is the amount of money you have made in the best-paid 35 years of your life. The SSA only counts earnings up to $132,900 for any year.

Step one is to compute your average indexed monthly earnings, or AIME, from those 35 years and historical changes in U.S. wages.

Step two is to apply a formula to your AIME that adds:

90 percent of the first $926;

32 percent of any amount between $926 and $5583;

Fifteen percent of amounts over $5583.

This total is what the SSA calls the "full retirement benefit." The administration recalculates your benefits each year, adjusting for inflation and taking into consideration your previous year's income.

If that income is larger than the year before, a lower-income year will not be calculated into the final amount. If you had a low-income year, a better year would be factored in, raising your benefit amount. 

If you worked fewer than 35 years, the SSA calculates zero earnings up to 35.

Your retirement age is the third factor that determines your benefit. The full retirement age is 66, and 67 for people born after 1960. If you decide to collect Social Security benefits at 62, you lose more than a quarter of the calculated amount. If you wait until 70 to retire, you can add as much as 32 percent (8 percent per year) to your determined benefit.

Is There a Monthly Maximum Social Security Benefit?

Yes. It is a function of your retirement age and is via three points: Early retirement, which is age 62, full retirement, which is age 67, and delayed retirement, which is age 70.

The maximum monthly benefits for 2019 are:

Early Retirement: $2,209

Full Retirement: $2,861

Delayed Retirement: $3,770

Can You Earn Money While Collecting Social Security?

Yes, you can. However, there are limits for early retirees and the year of full retirement. If you decide to take early retirement at 62, the income limit is $17,640 in 2019. For every two dollars over that cap, the Social Security amount is reduced by one dollar.

Working While Retired

In the year of full retirement, the earnings limit is $46,920. The Social Security amount is reduced by one dollar for every three dollars over that cap. At full retirement age, there is no limit to earnings. If a retiree continues to work and pay into Social Security, their benefit can increase if they increase their lifetime income.

What About Spousal Benefits?

Spousal benefits are determined by past and present marital status. Usually, benefits go to a current spouse, although former spouses can receive benefits from a marriage lasting ten years or longer.

Spousal benefits are calculated based on work, their work record, their spouse's work record, and the age at which the spouse claims their benefits. Many Americans qualify for spousal benefits even if they don't qualify for benefits based on their work history.

A non-working spouse can claim benefits at age 62 on two conditions: if their spouse has already claimed retirement benefits, and if they are raising that spouse's child and the child is under 16 or disabled.

That benefit is calculated using the spouse's retirement amount at the full age of retirement, or 100% of the Social Security earnings amount.

Working spouses can only claim the larger of the Social Security benefit calculated for the two people. These rules apply to same-sex couples and some legal non-marital relationships.

Ex-spouses can claim Social Security benefits based on their former spouse's work record. A 62-year old unmarried person can qualify for 50 percent of their ex-spouse's Full Retirement Age (FRA) benefit. It doesn't affect any payout for the spouse or their dependents.

The Social Security Earnings Test

If you claim spousal benefits before you reach your full retirement age, you will be subject to the Social Security earnings test. Income is capped for individuals under FRA, so the administration will withhold funds from your benefits if you go over that limit.

The same rules apply to spousal benefits as individual benefits: One dollar withheld for every two dollars over the cap for years before FRA, and 1 dollar withheld for every three dollars over the cap for the year of retirement.

Spousal benefits may be subject to income taxes as well. The IRS will tax your combined income (adjusted gross income + nontaxable interest + 50 percent of your Social Security Benefits) up to 50 percent of your Social Security amount if that income is over $25,000 for single people and $32,000 if married filing jointly. If that income exceeds $34,000 and $44,000 respectively, the IRS can tax up to 85 percent of your Social Security benefit.

The Maximum Family Benefit

This amount is the most one family can earn based on the earnings of one family member. This person is generally referred to as the breadwinner. Social Security can be paid in the form of spousal, disability, retirement, children's and survivor's benefits.

If the breadwinner is deceased or is collecting benefits, the family maximum is around 150 to 180 percent of the breadwinner's amount received at full retirement age. If the family's benefits exceed that cap, it is the spouse and children's benefits that are trimmed, not the breadwinner's amount.

This scenario only applies to families that are basing their benefits on one breadwinner's earnings. If the other family members have earnings records, Social Security will only pay the larger of the benefits.

Social Security payments to a former spouse are not included in the maximum and not reduced if the cap is exceeded.

Social Security Death Benefits

If a surviving spouse was living in the same household as a breadwinner, they might be eligible for a lump-sum survivor's benefit of $255. If they were not sharing the residence, the spouse could still receive the benefit if they were already receiving benefits on the breadwinner's record, or became eligible for benefits when the breadwinner passed away.

If they were not receiving benefits, they could apply for it within two years of the date of death.

It's important to note that spousal Social Security benefits are affected if you remarry before the age of 60. Married survivors cannot receive benefits. If you remarry after age 60, you can qualify for benefits as a surviving spouse. If you are disabled, the qualifying age is 50 years old.

You may also apply for Social Security benefits on your spouse's record if they are a beneficiary. If their amount is more than your widow's or widower's benefit, you can receive a combination of benefits that is higher than your deceased spouse's benefit.

The IRS has loads of information about what to do when a family member dies, so visit those pages to get the full range of options.

Maximize Your Social Security

If you can wait until your full retirement age or beyond, it's advisable to do so to receive your maximum social security benefit. The only circumstance under which it's unwise to wait is if you aren't in good health: you'll receive the money you need when you need it.

Remember to use a benefits calculator and plan carefully to get as much out of Social Security as you have paid into it. After all, that's what it's there for.