One of the biggest factors determining your Social Security retirement benefit is how much you earn during your career. A long, high-paying career puts you one step closer to receiving the maximum possible monthly check once you claim benefits.
But retirees shouldn’t discount the impact of claiming age in their decision. When you decide to start Social Security can have a massive impact on the size of your check too.
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That discrepancy is magnified when comparing the maximum possible Social Security benefit at ages 62 and 70. Some retirees decide to split the difference and claim benefits at their full retirement age, which will fall between age 66 and 67 for readers.
Looking at the difference between the maximum monthly check at each of the above ages could help retirees decide when to start Social Security.
Image source: Getty Images.
As mentioned, a long, high-paying career is necessary for anyone interested in the maximum Social Security benefit.
When the Social Security Administration goes to calculate your benefit, it takes a look at your entire earnings history. It adjusts all of your earnings from before you turned 60 for inflation, so they’re comparable to your earnings from the year in which you turned 60. Any earnings after age 60 don’t get an adjustment. It then selects the 35 highest-earning years and calculates your average income for your career.
That number then goes into the Social Security benefits formula to determine your primary insurance amount, or PIA. Your PIA is what you qualify for when claiming benefits at full retirement age. If you claim before reaching full retirement age, you receive less than your PIA. In other words, the longer you wait to claim, the larger your benefit will be (with a cap at age 70).
Collecting the maximum Social Security benefit does not require you to earn millions of dollars each year as there’s an annual limit on the amount of individual wages the government taxes for the program. Any earnings above that amount won’t incur Social Security taxes, but they also won’t count toward your earnings history.
The Social Security Administration adjusts the amount each year for inflation. For 2024, anyone earning $168,600 or more paid the exact same amount of Social Security taxes. The limit for 2025 is $176,100.
Earning above the taxable limit for 35 years will put you in line for a sizable Social Security check when you retire. For reference, here’s what the maximum taxable earnings have been over the last 50 years.
Year
Earnings
Year
Earnings
1976
$15,300
2001
$80,400
1977
$16,500
2002
$84,900
1978
$17,700
2003
$87,000
1979
$22,900
2004
$87,900
1980
$25,900
2005
$90,000
1981
$29,700
2006
$94,200
1982
$32,400
2007
$97,500
1983
$35,700
2008
$102,000
1984
$37,800
2009
$106,800
1985
$39,600
2010
$106,800
1986
$42,000
2011
$106,800
1987
$43,800
2012
$110,100
1988
$45,000
2013
$113,700
1989
$48,000
2014
$117,000
1990
$51,300
2015
$118,500
1991
$53,400
2016
$118,500
1992
$55,500
2017
$127,200
1993
$57,600
2018
$128,400
1994
$60,600
2019
$132,900
1995
$61,200
2020
$137,700
1996
$62,700
2021
$142,800
1997
$65,400
2022
$147,000
1998
$68,400
2023
$160,200
1999
$72,600
2024
$168,600
2000
$76,200
2025
$176,100
Data source: Social Security Administration.
Determining the best age to claim Social Security will come down to your personal circumstances, needs, and wants for retirement.
You become eligible to claim benefits on your own earnings record starting at age 62. But as previously mentioned, claiming as soon as possible comes with the drawback of a smaller check. You’ll likely rely mostly on your retirement savings for income. On the plus side, claiming at 62 could allow you to retire earlier.
If you wait until 70, you’ll eventually receive a much larger check, possibly enough to provide a stable retirement income without the need to rely on investment returns to fund your golden years. However, you’ll have to make up the difference by drawing down your retirement accounts in your 60s or continuing to work.
Splitting the difference by waiting until 66 or 67 could allow you to avoid waiting too long to retire while also getting you more in benefits. With all that in mind, here’s what the maximum benefit looks like at each age in 2024 and 2025.
Retirement Age
62
66
67
70
Maximum monthly benefit in 2024
$2,710
$3,652
$3,911
$4,873
Maximum monthly benefit in 2025
$2,831
$3,795
$4,043
$5,108
Data source: Social Security Administration.
Despite earning similar salaries throughout their careers, someone turning 70 in 2025 could receive a benefit that’s over 80% higher per month than their 62-year-old counterpart. In absolute terms, the maximum possible benefit for the 70-year-old is over $27,000 more per year. That’s enough to cover a lot of living expenses or to add some nice vacation time each year.
It’s worth pointing out that some of the difference in monthly benefits is due to the ongoing transition in full retirement age for those born between 1955 and 1960. That’s somewhat offset by factors favoring younger retirees. Still, all things being equal, someone turning 62 this year can expect to receive a benefit 77% bigger if they wait until 70 versus claiming this year.
If you’ve earned enough to put yourself in line for the maximum possible Social Security benefit, or close to it, you’re likely in a very good financial position regardless of what you get from the program. So, if you have sufficient retirement savings in your investment accounts, you’ll likely be better off drawing from your accounts and delaying benefits all the way until age 70.
There are several factors to consider for high earners. Survivor benefits will likely play a role in the decision. The benefit allows your spouse to collect whatever you were receiving from Social Security if you pass away before them. As such, you should consider your joint life expectancy in the claiming decision instead of just your own. That makes it very likely that waiting until age 70 will maximize the total amount Social Security pays out on your earnings record.
Second, you should consider the impact of Social Security on your taxes. It doesn’t take a lot of additional retirement income before the government starts imposing taxes on your monthly Social Security check. That’s because the income limits for Social Security income tax haven’t changed since 1993. If you plan ahead of claiming Social Security, you can position your retirement accounts to reduce your overall tax bill with strategies such as Roth conversions and realizing capital gains at a low tax rate. Those tactics become impractical once you start receiving Social Security.
Waiting until 70 is statistically most likely to result in the greatest level of wealth for retirees. That’s because life expectancies continue to improve, and you’re likely to end up collecting more in benefits over the long run just by living long enough to keep cashing your monthly checks. As such, high earners should generally aim to wait as long as possible before claiming their benefits.
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