Maximum Social Security Benefits Example
Say that someone who turns 62 in 2021 will reach FRA at 66 years and 10 months, with earnings that make them eligible at that point for a monthly benefit of $1,000. Opting to receive benefits at age 62 will reduce their monthly benefit by 29.2% to $708 to account for the longer time they could receive benefits, according to the Social Security Administration. That decrease is usually permanent.
If that same individual waits to get benefits until age 70, the monthly benefit increases to $1,253. The larger amount is due to the delayed retirement credits earned for the decision to postpone receiving benefits past FRA. In this example, that higher amount at age 70 is about 77% more than the benefit they would receive each month if benefits started at age 62, or a difference of $545 each month.
A Social Security Administration calculator can give you more-personalized information. Of course, the best time for someone to start taking Social Security benefits depends on a variety of factors, not just the dollar amount of the benefit. Things such as current income and employment status, other available retirement funds, and life expectancy must also be factored into the decision.
Your Earnings History Is A Key Factor In Calculating The Amount Of Your Benefit
Your Social Security benefits are determined by a number of factors, but your earned income over the course of your working life is probably the most importantso the more the better. Is Social Security considered earned income? Unfortunately, the answer is no.
Working In Any Years Before You Hit Fra
The earliest you can claim Social Security is 62, but if you were born in 1943 or later, the earliest you’ll reach FRA is 66. This means you could both work and earn Social Security benefits for as long as four to five years before you reach the year you’ll hit FRA. In any of these years, your benefits will be reduced by $1 for every $2 earned above a set income limit.
The amount you can earn without affecting benefits changes each year. For 2019, the limit is $17,640. This is the limit that applies to you if you will not hit FRA in 2019 but are working and receiving Social Security benefits at the same time during this year.
Let’s take a look at how this could affect your benefits, assuming you were scheduled to receive $14,000 in total checks from Social Security in 2019 and that you will not hit FRA during the entirety of this year:
If you have some money withheld from benefits due to working too much, you get credited for this and eventually get your money back — provided you live long enough. We’ll discuss how and when your withheld funds come back to you below.
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Tips For Retirement Planning
- Even after you max out your benefits, chances are Social Security wont pay as much as what you earned. To make up the difference, youll need to draw on your nest egg. To find out how large a nest egg youll need, use our award-winning retirement calculator.
- As you approach retirement, you may be uncomfortable keeping your savings in the stock market. In that case, you may want to buy an annuity. A financial advisor can help you determine what makes the most sense. And SmartAsset can help you find a financial advisor. Just use our matching tool. Itll recommend three advisors based on your preferences and goals.
Smart Ways To Spend Your Social Security Check
Social Security is the lifeblood of Americas retirement system. More than 49.2 million people age 65 and older 62.2 million in all in the U.S. receive a Social Security check each month, which averages $1,442, according to October 2021 data from the Social Security Administration .
For the typical senior citizen, Social Security represents the majority of their retirement income, according to a 2020 report from the Center on Budget and Policy Priorities.About half of the seniors receiving Social Security depend on it for at least 50% of their income. For about one in four seniors, its more than 90% of their income.
Thats why its important to spend it well. Read on for smart suggestions about how tospend your Social Security benefitsto make sure youre getting the most for your money.
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Or Go All The Way And Work Until 70
The longer you hold off receiving your Social Security benefits, up to age 70, the bigger your check. So each month after youve reached your FRA, your payout increases by roughly 0.7% percent , which amounts to 8% per year. If you wait till age 70 then, your payments will be 32% bigger than if you had started taking benefits at 66. Once you turn 70 though, there is no added benefit in postponing payments.
Of course, working until 70 isnt for everyone, and theres no penalty in claiming your benefits when you reach your FRA. You will receive 100% of your benefit. Its also not a sure thing that waiting until 70 maximizes your lifetime benefit. After all, should you pass away the following year, waiting that long will mean you received far less total benefits than if youd claimed them as soon as you were eligible to. So consider your life expectancy as you make this decision.
Consulting With A Social Security Attorney
Social Security can be complicated and very intimidating to apply for. It is also vital that everything is completed correctly so that your chances of receiving benefits are their highest.
To maximize your potential to receive benefits, consider getting assistance from a Social Security attorney. Their expertise in filing paperwork and presenting cases can make all the difference you need to qualify for the benefits you deserve.
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No : Start Collecting Early At 62
If you live an average lifespan, though, you won’t come out ahead much by delaying, because you’ll get fewer checks, in total, than those who started earlier with smaller checks. If you live much longer than average, though, waiting will have been worth it. But if you have reason to believe you will live a shorter-than-average life, or you simply need the money, go ahead and start collecting early. For most people, that’s a perfectly reasonable thing to do.
Social Security Eligibility: What It Takes To Receive Max Monthly $3895
For many Americans, social security benefits are a major source of income after retirement. In 2021, an average of 65 million Americans will receive monthly social security benefit checks totaling over $1 trillion paid during the year, according to the Social Security Administration.
While the average retiree receives $1,557 per month in benefits, the maximum you can receive per month is $3,895, as GOBankingRates previously reported. However, how much you receive depends on numerous factors.
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Top Benefits For Those Turning : $3538
The absolute maximum benefit comes for those who reach age 70, because they can claim delayed retirement credits of 30% or more depending on full retirement age. The $3,538 figure issued by the IRS is almost 32% higher than the age 66 number, reflecting the reward for waiting longer.
Again, the longer you wait, the fewer checks you receive. However, with the maximum being almost $1,400 higher than claiming at age 62, it’s easy to see the benefit of delaying as long as you can.
Social Security benefits are important because they’ll make up your most reliable income throughout your lifetime. By knowing the maximum you can get from Social Security, you’ll be in the best position to get as much as the program will make available to you. Even if you can’t earn enough to max out your Social Security, just bear in mind that the higher your earnings, the closer you’ll get to the maximum amounts listed above.
Special Rule As You Approach Full Retirement Age
If you are already receiving your retirement benefits, a special higher earnings limit applies in the calendar year you turn your full retirement age . If you will reach full retirement age in 2021, you can earn up to $4,210 per month without losing any of your benefits, up until the month you turn 66. But for every $3 you earn over that amount in any month, you will lose $1 in Social Security benefits. Beginning in the month you reach full retirement age, you become eligible to earn any amount without penalty.
If you are self-employed, you may receive full benefits for any month during this first year in which you did not perform what Social Security considers “substantial services.” The usual test for whether you worked substantial services is whether you worked in your business more than 45 hours during the month . In other words, if you work in your business more than 45 hours in a month, Social Security may reduce your benefit.
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Who Is Eligible For Social Security Retirement Benefits
Social Security retirement benefits are not based on need but rather on income earned during your earning life. The Social Security Administration keeps a record of earnings over your working life and pays benefits that are based on the average amount earned, provided a minimum number of work credits have been accumulated. Only income on which Social Security tax is paid is considered in calculating these work credits.
To be eligible for Social Security retirement benefits, a worker born after 1928 must have accumulated at least 40 quarters of work in “covered employment”. A “quarter of coverage” generally means the three-month calendar quarter. In addition, you must earn at least $1,470 in a quarter for it to count. However, the SSA looks at how much you earned in a year and divides that figure by the minimum amount required to earn credit for a quarter. Thus, if you earn at least $5,880 in January and February of 2021 and don’t work the rest of the year, you will receive credit for four quarters of work .
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Before You Make Your Decision
There are advantages and disadvantages to taking your benefit before your full retirement age. The advantage is that you collect benefits for a longer period of time. The disadvantage is your benefit will be reduced. Each person’s situation is different. It is important to remember:
- If you delay your benefits until after full retirement age, you will be eligible for delayed retirement credits that would increase your monthly benefit.
- That there are other things to consider when making the decision about when to begin receiving your retirement benefits.
Should I Wait Until Full Retirement Age To Apply For Social Security
Receiving Social Security at age 62 means that you will receive a reduced payment compared with waiting for full retirement age. For those born in 1960 or later, the reduction is 30%, and all reductions are permanent. If you delay taking your benefits past full retirement age, then you receive an 8% increase for each full year that you do so, up until you reach 70, at which point the increases stop.
Every individual can calculate their own full retirement age based on their specific birthday, to consider locking in the maximum amount of Social Security benefits.
There Are Social Security Benefits For Surviving Spouses And Children
If your spouse dies before you, you can take a Social Security survivor benefit, but not in addition to your own benefit. You must choose one or the other. If you are at full retirement age, that benefit is worth 100% of what your spouse was receiving at the time of his or her death .
A widow or widower can start taking a survivor benefit at age 60, but the benefit will be reduced because it’s taken before full retirement age. If you remarry before age 60, you cannot get a survivor benefit. But if you remarry after age 60, you may be eligible to receive a survivor benefit based on your former spouse’s earnings record.
Eligible children who are under age 18 or were disabled before age 22 can also receive a Social Security survivor benefit, worth up to 75% of the deceased’s benefit.
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Your Monthly Social Security Benefits Grow The Longer You Wait To Claim
You can collect Social Security benefits as soon as you turn 62, but taking benefits before your full retirement age results in a permanent benefits reduction of as much as 25% to 30%, depending on your full retirement age.
If you wait until you hit full retirement age to claim Social Security benefits, youll receive 100% of your earned benefits. Or you can keep waiting to claim your Social Security benefits all the way to age 70. There’s a big bonus to delaying your claim — your monthly Social Security benefit will grow by 8% a year until age 70. Any cost-of-living adjustments will be included, too, so you don’t forgo those by waiting.
Waiting to claim your Social Security benefits can benefit your heirs as well. By waiting to take his benefit, a high-earning husband, for example, can ensure that his low-earning wife will receive a much higher survivor benefit in the event he dies before her. That extra income of up to 32% could make a big difference for a widow whose household is down to one Social Security benefit.
How To Lose Ssdi Benefits
The commonest reason why the SSA would stop a persons Social Security Disability payments is because the recipient has gone back to work, even though this isnt always the case. If you go back to your normal job when in receipt of SSDI benefits the SSA will decide if you are taking part in substantial gainful activity .
The key factor in deciding if work is considered to be SGA is the amount someone is paid. In 2020, somebody is typically considered to be engaging in SGA if his/her earnings exceed $1,260 or $2,110 for someone who is blind.
For example, if you are earning $200 weekly in a part-time job, you are not working above the SGA limit. If you are spending a lot of time at work but what you are doing constitute SGA despite the earnings being below the SGA threshold you could have your SSDI stopped.
However, if you are working and make over SGA you can be entered into a trial work period. This period allows somebody who is receiving SSDI benefits to try to go back to work without being told they will lose their SSDI eligibility.
In the majority of cases, you should be able to work for up to 9 months during a trial work period and you will still continue to receive your SSDI regardless of the amount you are earning. When the trial work period comes to an end and you are still taking part in a job earning above the SGA level the SSA is likely to decide you are no longer disabled so your Social Security Disability payments will stop.
Why We Have An Earnings Limit
Not long ago, a viewer on my YouTube channel asked me to give her a good reason why we have the Social Security earnings limit. The comments that followed showed how many viewers shared the belief that the earnings limit is unfair and should be eliminated.
In my response, I explained that the rationale behind the entire program of Social Security was to create a safety net. The original intent of the Social security program was not to supplement retirement income, but to keep the elderly out of poverty.
I also added that todays earnings limit is relatively generous compared to where the Social Security earnings limit began. The original Economic Security Bill President Roosevelt sent to Congress featured a very restrictive earnings limit.
That bill stated, No person shall receive such old-age annuity unless . . . He is not employed by another in a gainful occupation.
Whoa! This means that if you had even a single dollar in wages from a job, you could not collect a Social Security benefit at all.
Thankfully, the system we have in place today allows for individuals to have some earnings from work while they are receiving a Social Security benefit.
However, its very important to stay informed on the dollar amount of this limit because it changes every year.
For 2020, the limit is $18,240. For every $2 you exceed that limit, $1 will be withheld in benefits.
Again, once you reach full retirement age, there is no reduction in benefits regardless of your income level.
How Much Can I Earn If I Retire At 62 In 2021
Social Security beneficiaries who continue to work will be able to earn $720 more in 2021 before part of their Social Security benefit is temporarily withheld. Social Security recipients age 65 and younger can earn up to $18,960 in 2021 before a benefit dollar is withheld for every $2 earned above the limit.
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Children Can Collect Social Security Benefits Too
Minor children of Social Security beneficiaries can be eligible for benefits. Children up to age 18 and disabled children older than 18 may be able to receive up to half of a parent’s Social Security benefit. The disability must have occurred before the age of 22. As long as the disability prevents the person from working, the adult child can continue collecting the benefit even after the parent has died.