Social Security benefits increased by 3.2% this year. So, how does that affect the maximum benefit limit?
The estimated average Social Security benefit for retired workers in 2024 is $1,907 per month. The maximum benefit amount, however, is more than double that.
Here’s a look at the most you can receive from Social Security in 2024 and how the benefit calculation process works.
[READ: What Will the Social Security COLA Raise Be for 2024?]
What Is the Maximum Possible Social Security Benefit in 2024?
The maximum Social Security benefit you can receive in 2024 ranges from $2,710 to $4,873 per month, depending on the age you retire. “Maximum benefits can be received by delaying the start of benefits until age 70 since benefits increase by about 8% for each year you delay beyond full retirement age. It’s also essential to have maximum taxable earnings for at least 35 years,” said Michelle Delker, certified public accountant and founder of The William Stanley CFO Group, in an email.
[READ: How Much You Will Get From Social Security.]
Each year, the Social Security Administration limits the amount of earnings that are subject to Social Security taxes. That limit is the maximum amount of income that counts toward computing your Social Security benefit for the year.
In 2024, for example, the limit is $168,600. To receive any of the maximum benefit amounts above, you must have worked for at least 35 years, during which you made at least the maximum income amount for the year.
What Is Full Retirement Age?
Full retirement age refers to when you can claim your full Social Security benefits. It varies depending on when you were born. See the table below for more information on full retirement age. You don’t have to wait until full retirement age to claim your benefits because they’re available once you turn 62. The SSA will reduce your benefits, however, if you take them early. For example, if you were born after 1960 and take your benefits when you’re 62, they’ll be reduced by 30%.
[What Is the Best Age to Retire?]
What Factors Determine Your Social Security Benefits?
“The Social Security Administration calculates the benefit amount for each recipient annually, taking into account their average income over 35 years, cost-of-living adjustments and other factors,” said Linda Chavez, founder and CEO of Seniors Life Insurance Finder, in an email.
Here’s a closer look at the four main factors that determine your benefit amount each year:
— Average Indexed Monthly Earnings (AIME): The SSA indexes your highest earnings over a maximum of 35 years to reflect changes in general wage levels during your employment years. The average is then rounded down to the nearest dollar to get your AIME.
— Primary Insurance Amounts (PIA): The PIA is the benefit amount a person gets if they elect to receive benefits at full retirement age. It’s the sum of three separate percentages of portions of the AIME, based on changes in the national average wage index.
— Retirement age: The age at which you retire will determine if your benefit amount is higher than, lower than or equal to the PIA.
— Other benefits: Your benefit amount will be higher if you qualify for other Social Security benefits, like those paid to disabled workers.
[See: 10 Ways to Increase Your Social Security Payments.]
How to Boost Your Social Security Benefit
Even if you don’t qualify for the maximum benefit, the closer you are to hitting the maximum income limit each year, the higher your benefit amount. If you have any zero years in your 35-year average, try to replace them.
“Be sure that you have 35 full years of contributions to the system,” said David Freitag, a financial planning consultant with MassMutual Financial Group, in an email. “The 35-year average will include any zero years. By removing them, you can increase the size of your check at retirement time. Even a small contribution to the 35-year average will help increase the benefit.”
It can also pay to wait until you’re 70 to begin taking your benefits, but that will depend on your situation.
“Generally, this depends on longevity. If you have short longevity, then taking benefits early will maximize your retirement benefit. If you have extended longevity, then deferring benefits and earning those 8% per year delayed retirement credits is the way to go,” Freitag said.
You can get an idea of your expected longevity by using the simple life expectancy calculator at SSA.gov or a more detailed calculator like the one found at Living to 100.
Social Security: Just 1 Piece of the Puzzle
While some Americans may qualify for the maximum Social Security benefit amount, that’s not the norm. Most people will need to plan for a benefit closer to the average, along with other supplementary retirement income sources.
Delker said, “To maximize retirement income, consider diverse income streams. Besides Social Security, retirement funds like 401(k)s and IRAs, investments in stocks, bonds or real estate, and potentially part-time work can be beneficial.”
More from U.S. News
How Much You Will Get From Social Security
What Is a Social Security Statement — And Should You Be Checking It?
How to Handle Social Security Customer Service Problems
What Is the Maximum Possible Social Security Benefit in 2023? originally appeared on usnews.com
Update 02/12/24: This story was published at an earlier date and has been updated with new information.
