How To Maximize Your Social Security Retirement Benefits

Social Security is a part of the retirement plan for almost every American worker and provides the majority of income to most elderly Americans.

As of June 2020, over 64 million US citizens (approximately 1 in every 6 Americans) collected Social Security benefits. 

The maximum monthly Social Security benefit that an individual can receive in 2020 depends on what age the benefits are claimed: 

Filing at age 62: $2,265 per month
Filing at full retirement age (FRA): $3,011.00 per month
Filing at age 70: $3,790 per month

Keep in mind that these maximum benefits are not typically what individuals receive, as monthly payments are determined by a few factors.

How Are Social Security Payments Calculated?

Social Security payments are calculated using the 35 highest earning years of your career (adjusted for inflation). If you work for more than 35 years, your lowest earning years are not included in the calculation—which results in a higher payment.

Individuals who don’t work for 35 years have zeros averaged into the Social Security calculation and receive smaller payments.

As of 2020, the benefit amount is calculated by multiplying the first $960 of average indexed monthly earnings by 90%, remaining earnings up to $5,785 by 32%, and earnings over $5,785 by 15%.

Your first payment, referred to as the Primary Insurance Amount (PIA),  is rounded down to the nearest 10 cents of the sum of these three amounts. PIAs are adjusted annually to reflect the national average wage index.

What Age Should I Claim My Social Security Retirement Benefits?

A Full Retirement Age (FRA) is the age when an individual is entitled to 100% of their monthly benefit. If you are unsure what your full retirement age is, you can check based on year of birth on the SSA website.

You can choose to claim your benefits as early as age 62, or you can hold until up to age 70 and your retirement benefit will increase by as much as 8% annually for every year you wait. 

The average Social Security retirement benefit in June 2020 was approximately $1,514.00/month, whereas individuals who chose to claim their benefit early at age 62 received an average of $1,130.16/month.

Around 60% of Americans claim their retirement payout prior to reaching their full retirement age, and the most popular claiming age is 62. 

Use the chart available here to find out how much your benefit would be reduced if you began receiving benefits from age 62 up to your full retirement age.