What Is the Maximum Possible Social Security Benefit in 2025?

Inflation is impacting retirees’ ability to cover daily expenses and limiting their recreational spending in areas such as travel.

The Social Security Administration provided some relief with a 2.5% cost of living adjustment, but that won’t keep pace with an inflation rate of 2.7%, as of November 2024. Given that paltry increase, here’s how retirees can maximize their Social Security benefits:

Wait Longer Before Taking Social Security

Delaying Social Security can be a sound financial strategy for retirees, as benefits increase for each year of delay up to age 70.

Full retirement age. Your FRA is based on your birth year. That’s the year you receive 100% of your full benefit. You won’t get extra credits for delaying, but you won’t have any money subtracted for claiming early.

Delaying past FRA. For every year you delay taking Social Security beyond your FRA, your monthly benefit increases by 8%. For example, if your full benefit is $2,000 per month, delaying until age 70 would boost it by 32%. That would bring your monthly benefit to $2,640.

Maximum age to delay. You can earn delayed retirement credits up until age 70. At that point, your benefits are capped, and there’s no additional benefit for waiting longer. This year, the oldest people eligible for Social Security benefits at age 70 were born in 1955.

Delaying Social Security benefits until 70 increases your payouts and also offers higher lifetime income and a safeguard against outliving savings, said Anthony Kure, managing director of the Northeastern Ohio Market at Johnson Investment Counsel in Cleveland, in an email.

“This strategy can be especially beneficial for those with longer life expectancies while preserving funds in tax-advantaged accounts,” he said.

[READ: What Is the Full Retirement Age for Social Security?]

Take the Benefit Early

It may seem counterintuitive, but taking Social Security before your FRA sometimes makes sense.

Some retirees need the money and have little choice but to claim early. Others believe Social Security is going bankrupt, which is highly unlikely.

In some cases, taking the benefit early won’t make a significant difference, either because it doesn’t change the probability of a successful retirement or because of a shorter-than-average life expectancy.

To determine whether taking early benefits is the right course, crunch the numbers to understand the long-term ramifications of starting early versus later.

“Don’t just focus on the short term. Look at your finances 10, 20 or even 30 years down the road,” said Dave Ragan, vice president of financial planning at Grunden Financial Advisory in Denton, Texas.

For those who choose to take the benefit early and continue working, the Social Security Administration will reduce your benefit by $1 for every $2 above an earnings limit of $22,320.

“However, every scenario is different. Just because your neighbor claimed at 70 and you claimed at 67 doesn’t mean you’re wrong,” Ragan said.

That decision, he said, is linked to factors including marital status, your health, whether you plan to keep working, your tax bracket and other aspects of your overall financial picture.

[Related:Reasons to Take Social Security Early at Age 62]

Other Ways to Increase Your Benefit

Social Security benefits are based on your top 35 years of earnings.

For example, if you had a part-time job at age 16, you weren’t making as much money as during your peak earning years later in life when you were established in a career.

“To maximize your benefit, consider working longer or increasing your income during those years to replace lower-earning periods in the calculation,” said Allison Alexander, financial advisor at Savant Wealth Management in Chicago, in an email.

To maximize your total household benefit, look into a spousal strategy. This allows one spouse to claim up to 50% of their higher-earning spouse’s full retirement benefit if claimed at their FRA.

“Look beyond your own life expectancy,” Ragan said. “Spousal benefits need to be explored and can sometimes be the main driver of delaying benefits. The life expectancy of two people is longer than just one life.”

[READ: How Raising the Retirement Age Could Help or Hurt Seniors]

Social Security as One Piece of Retirement Income Puzzle

In the past, Social Security was considered one leg of a three-legged stool, along with investments and pension income.

Nowadays, fewer and fewer people have corporate pensions, although many government workers continue to receive them. That means Social Security often augments income from investments.

When forming a financial plan, pre-retirees should evaluate how the income stream from Social Security fits with an investment withdrawal strategy. That evaluation should include the impact of taxes.

“This one is a big one for me, and often misunderstood based on tax implications and investments,” said Patrick Ray, senior vice president and financial advisor at Wealth Enhancement Group in St. Louis, in an email.

For example, he said, retirees who delay benefits must supplement their income from investment withdrawals. Those who take benefits earlier can reduce the percentage of money leaving their portfolio.

By keeping more money in your investment account, you take advantage of compounding, which creates more liquidity later in life. It can also provide more money to leave in your estate.

“Also, many people do not know that your Social Security benefits are between 50% and 85% taxable as income, depending on your household,” Ray said.

However, because the entire benefit is not considered taxable income, retirees should balance that against tax ramifications of withdrawals from qualified plans such as a traditional 401(k). Those withdrawals are taxable at ordinary income tax rates.

More from U.S. News

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What Is the Maximum Possible Social Security Benefit in 2025? originally appeared on usnews.com

Update 01/13/25: This story was published at an earlier date and has been updated with new information.

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