Having your retirement life sorted and getting financial benefits after retirement is what every employee strives for; living a retirement life without financial worries is a blessing on its own, but how to get the maximum benefits is what matters the most, especially monthly benefits from social security.
If you are looking for the monthly benefits that social security offers, you need to know a few things that make you entitled to those benefits after retirement. The first thing to know is Social Security is based on your Lifetime earnings. Still, there is a limit to how much is deducted from your income and how much you will get monthly after retirement.
The maximum benefit that one can get from social security is when you retire at the age of 70 years.
Understanding Social Security Benefits
The two major factors that play a vital role in getting maximum social security benefits are the age you start collecting it and your earning history. For 2022, someone who files social security benefits at the full retirement age (FRA) of 66 years gets $3345 per month. Still, someone who qualifies for the benefits and delays claiming until 70 is entitled to $4194.
Eligibility Criteria
There is a basic criterion to qualify for social security that requires 40 work credits, where one credit equals $1510, or you have a 10 years work history, and to receive maximum social security benefits; you should make an income that falls in the maximum benefit taxable income criteria of social security for 35 years.
For the year 2022, the social security maximum taxable income is $147000, and for 2023 it is $160200; the increase is due to year-on-year adjusted cost of living. You must earn the maximum amount till your retirement age of 66. If you wait for longer, you will get absolute benefits, per the social security administration (SSA). For getting $4555 per month in the year 2023, you must maintain the maximum benefits taxable income from 22 years of age.
Calculating Social Security Maximum Benefits
Although social security maximum benefits can be calculated from different calculators available on the official site of (The social security Administrator), for better understanding, let's break it down. The social security benefits are calculated by accumulating 35 years of pay.
The process starts by indexing all the wages to account for inflation; all the wages are evaluated based on the year in which they were earned; these calculations give amount numbers that can be compared with the buying power and the current dollar value. For example, a $14000 salary in 1950 was more valuable than today.
After indexing all the wages, their sum is divided by 420 (months, 35 years) to calculate the average indexed monthly earnings (AIME). A zero is added to years if you worked for less than 35 years; the benefit amount is calculated based on the years when collection begins, whether FRA is reached and whether you keep working while collecting benefits.
You can claim your social security benefits if you have 40 work credits or as early as 62 years, but to get higher benefits, wait till FRA. Suppose you are 62 in 2023, and you will get $2572 in benefits; a person who is 66 years will get 100% of benefits; if a person waits till 70 years, they will get an additional 8% bonus for every year they delayed claiming.
Point to Consider for Getting Maximum Benefits
A handful of people accomplish their full term to collect the maximum benefit amount by fulfilling the criteria for getting the maximum social security benefits. For a person to get $4194 monthly as social security benefit needs to do the following:
Earning a Recommended Wage:
The first pre-requisite is earning a wage recommended by Social security for at least 35 years to get maximum social security benefits. Social security accounts for the average of your highest paid inflation-adjusted 35 years to calculate your benefits. For maximum benefits, your contribution must also be a maximum that is adjusted yearly according to the national wage index during your contribution period.
Wait Till 70 years to Get Maximum Benefits:
You can claim your social security benefit as early as 62. Still, to get the maximum benefit amount, you must wait and collect it after 70 years.
How to Earn Maximum Social Security Benefit
According to SSA (Social Security Administration), suppose a person will turn 62 in 2022. Still, they will reach their FRA at 66 years and 10 months, with eligible earnings can get $1000 per month in terms of benefits. Still, the person who starts taking the benefit at 62 will get a reduction of 29.2% in their monthly benefit and get $708 per month; this decrease remains permanent.
Similarly, if a person doesn't claim the benefits until 70, the monthly benefit will increase to $1253. The increase in monthly benefit amount is due to the delayed retirement credits, which are added due to postponing the benefits even after reaching FRA. The increase in monthly benefits is 77% compared to the monthly benefit amount that one can get at the age of 62 years.
Other than the dollar amount getting social security maximum benefits also depends on the employment status, current income, life expectancy, and availability of other retirement funds. As per SSA's current data and statistics, the average social security benefits are far lower than the maximum; for September 2022, it was $1628.17.
Final Thoughts
Getting maximum social security retirement benefits is a good option for extra financial security. Still, a few things need to be followed properly to get the maximum retirement benefits as per SSA guidelines, which include 40 work credits, having an income higher than the limit prescribed by SSA, and maintaining it for 35 years.
Anyone who fulfills all these criteria and retires at 62 years is eligible for the monthly benefits. Still, monthly benefits will be maximum if they delay claiming it till 70 years of age.
