Here's the Biggest Social Security Benefit Possible for Retirees at Ages 62, 66, 67, and 70 | The Motley Fool (2024)

Analytics company Gallup asked retired Americans the following question in an annual survey: "How much do you rely on Social Security today -- is it a major source of income, a minor source of income, or not a source at all?" In 2024, 60% of retirees classified benefits as a major source of income, and 28% classified benefits as a minor source of income.

In light of those statistics, future retirees should do everything in their power to get the biggest Social Security payout possible. Read on to see the maximum retired-worker benefit at ages 62, 66, 67, and 70 -- and what it takes to get the biggest Social Security payout.

Here's how Social Security retired-worker benefits are calculated

The Social Security benefit awarded to a retired worker depends on two things: Lifetime income and claiming age. First, lifetime income is used to calculate the primary insurance amount (PIA). Second, claiming age is used to adjust the PIA lower or higher for early or delayed retirement.

• Step 1: Inflation-adjusted earnings from the 35 highest-paid years of work are run through a formula to determine a worker's PIA. The PIA is the benefit the worker will receive if they claim Social Security at full retirement age (FRA).
• Step 2: Workers who claim Social Security before FRA have their benefit revised lower, meaning they get less than 100% of their PIA. Workers who claim Social Security after FRA have their benefit revised higher, meaning they get more than 100% of their PIA.

There are two limitations to those rules. First, workers cannot collect retirement benefits before age 62. Second, workers should never claim retirement benefits later than age 70, as delayed retirement credits stop accumulating at that age.

How to get the maximum Social Security benefit

Readers may wonder why Social Security maxes out at a certain point. I've just explained that benefits are essentially calculated as a percentage of lifetime income, and there is no limit to how much income a worker can earn. So why is Social Security limited?

The answer is that only some income is subject to Social Security payroll tax, and only the same amount of income is considered when Social Security benefits are calculated. For instance, the maximum taxable earnings limit is $168,600 in 2024. Income above that amount is not subject to Social Security payroll tax, nor is it included in the benefits formula.

With that in mind, to get the maximum Social Security benefit, retired workers need income exceeding the maximum taxable earnings limit for at least 35 years. The limit usually increases each year to account for changes in general wage levels, as detailed below.

Data source: Social Security Administration.

Just 6% of workers have income above the maximum taxable earnings limit in a given year, according to the Social Security Administration. That means very few people earn enough money to get the maximum Social Security benefit. However, claiming age still has a profound effect on the final payout.

Here's the maximum Social Security benefit for retired workers in 2024

The chart below shows the maximum Social Security benefit for newly awarded retired workers at different ages. The biggest payout changes each year because the maximum taxable earnings limit is updated annually to account for changes in general wage levels. The chart below applies specifically to 2024.

Data source: Social Security Administration.

The four ages shown in the chart cover the spectrum of possible outcomes. 62 is the earliest possible claiming age, 70 is the latest sensible claiming age, and 66 and 67 provide data points in the middle. The former is slightly below FRA, and the latter is slightly above FRA.

The chart makes one thing perfectly clear: Retirees pay a high price for collecting Social Security before age 70. That does not mean everyone should claim benefits at that age. Ultimately, when to start Social Security is a personal decision best made with help from a financial advisor. But everyone should know how much money is at stake.

Remember, workers who claim Social Security at FRA receive 100% of their PIA. But workers who start Social Security before FRA reduce their benefit by five-ninths of 1% per month for the first three years (6.7% annually), and five-twelfths of 1% (5% annually) thereafter. However, workers who delay Social Security beyond FRA increase their benefit by two-thirds of 1% per month (8% annually).

That means workers born in 1960 or later (whose FRA is age 67) can increase their benefit by 77% if they claim Social Security at age 70 as opposed to age 62. That is true regardless of lifetime income.