The maximum monthly Social Security benefit depends on when you were born and the age you retire. For someone retiring at their full retirement age in 2023, the maximum benefit is $3,538 per month.
What is the full retirement age?
Your full retirement age is the age at which you can start receiving your full Social Security retirement benefit. It used to be 65 for everyone, but now it varies depending on your birth year:
| Year of Birth | Full Retirement Age |
|---|---|
| 1943-1954 | 66 |
| 1955 | 66 and 2 months |
| 1956 | 66 and 4 months |
| 1957 | 66 and 6 months |
| 1958 | 66 and 8 months |
| 1959 | 66 and 10 months |
| 1960 and later | 67 |
So someone born in 1955 has a full retirement age of 66 years and 2 months. That is when they can collect their maximum possible Social Security benefit.
How is the maximum benefit calculated?
The maximum benefit is calculated based on your lifetime earnings covered by Social Security. Specifically, it is based on your average indexed monthly earnings (AIME).
To calculate your AIME:
- Take your annual covered earnings from your 35 highest earning years.
- Adjust each year’s earnings for inflation to make them equivalent to today’s average wage index.
- Add up those 35 adjusted totals and divide by 420 months (35 years x 12 months per year) to get your average indexed monthly earnings.
This AIME amount is then run through a formula by the Social Security Administration to determine your basic benefit, or “primary insurance amount (PIA).” As of 2023, the PIA formula takes your AIME and:
- Applies a 90% factor to AIME up to $1,073
- Applies a 32% factor to AIME between $1,073 and $6,466
- Applies a 15% factor to AIME above $6,466
This PIA is the monthly benefit you would get if you started Social Security at your full retirement age. The maximum possible PIA in 2023 is $3,538.
How to get the maximum benefit
To actually get the maximum $3,538 monthly benefit, you would need to:
- Have at least 35 years of earnings at or above the Social Security wage base amount each year. This is the amount of income subject to Social Security taxes.
- Delay claiming benefits until age 70.
- Be born 1943 or later (have a full retirement age of at least 66).
If you claimed at your full retirement age instead of age 70, your benefit would be reduced compared to the maximum since it applies an actuarial reduction. If you start even earlier, at age 62 for example, your benefit is reduced further because you will collect it for more years.
Key facts about maximizing your Social Security benefit:
- Each additional year you delay benefits from full retirement age up to 70 results in an 8% boost to your monthly check.
- Someone with average earnings retiring at 62 would get 30% less per month compared to if they waited until full retirement age.
- The benefits of delaying max out at age 70, so there is no additional boost for waiting beyond 70.
Examples of maximum vs. early benefit amounts
To illustrate the difference in starting Social Security at 62, full retirement age (FRA), or 70, here are some examples of maximum and reduced benefit amounts for retirees at different ages:
| Year of Birth | Full Retirement Age | Max monthly benefit at FRA | Max monthly benefit at age 70 | Reduced benefit at age 62 |
|---|---|---|---|---|
| 1943 | 66 | $3,538 | $4,194 | $2,364 |
| 1955 | 66 and 2 months | $3,538 | $4,194 | $2,364 |
| 1960 | 67 | $3,895 | $4,612 | $2,637 |
As you can see, the maximum benefit difference from age 62 to full retirement age is about 30% for those with an FRA of 66. The difference from FRA to age 70 is around 8% per year of delay.
Key takeaways
- Claiming at FRA results in your primary insurance amount (PIA), while waiting until 70 provides your maximum possible benefit.
- Starting early at age 62 permanently reduces your monthly benefit compared to your PIA.
- The maximum benefit has increased over time due to rises in the national average wage index.
How benefits are taxed
While Social Security benefits are not considered taxable income at the federal level, a portion of them may be subject to federal income tax if your combined income exceeds certain thresholds. Your “combined income” is your adjusted gross income, non-taxable interest, and half your Social Security benefit.
For individuals, up to 50% of benefits may be taxable if combined income is between $25,000 and $34,000. Up to 85% may be taxable if over $34,000. For married couples filing jointly, up to 50% of benefits may be taxable if combined income is between $32,000 and $44,000. Up to 85% may be taxable if over $44,000.
Steps to determine if your benefits are taxable
- Add up all your income sources (wages, self-employment, interest, dividends, retirement distributions, etc.) to calculate your adjusted gross income.
- Add in any non-taxable interest income from sources like municipal bonds.
- Add half of your annual Social Security benefit amount.
- Compare the total to the IRS thresholds above to estimate your taxable portion.
So even with the maximum benefit amount, a significant portion is shielded from federal income tax depending on your other taxable income sources during retirement.
COLA increases over time
The maximum Social Security benefit increases most years due to automatic cost-of-living adjustments, or COLA. COLA increases are based on inflation as measured by the Consumer Price Index (CPI-W).
Here are the COLA increases over the past decade:
| Year | COLA % | Max Benefit |
|---|---|---|
| 2014 | 1.5% | $2,642 |
| 2015 | 1.7% | $2,663 |
| 2016 | 0.0% | $2,663 |
| 2017 | 0.3% | $2,687 |
| 2018 | 2.0% | $2,788 |
| 2019 | 2.8% | $2,861 |
| 2020 | 1.6% | $2,903 |
| 2021 | 5.9% | $3,148 |
| 2022 | 5.9% | $3,345 |
| 2023 | 8.7% | $3,538 |
As you can see, COLA increases have bumped up the maximum benefit by over 25% in the past decade. However, they have been inconsistent, with zero increases in 2016 and only 0.3% in 2017. Overall though, COLA has helped maintain seniors’ buying power from Social Security income.
Projecting future maximum benefits
Social Security trustees project COLA to average around 2.4% per year moving forward. However, as we’ve seen, the actual COLA can fluctuate wildly in any given year depending on inflation.
For example, 2023 saw an unusually high 8.7% COLA due to inflation rising in 2022. But assuming 2.4% annual COLA, the estimated maximum benefit would be:
- 2024: $3,624
- 2025: $3,713
- 2030: $4,112
- 2035: $4,565
- 2040: $5,082
Again, this is just an estimate using average projected COLA. The actual amounts could end up higher or lower based on inflation over the next two decades.
Requirements for receiving Social Security
To receive Social Security retirement benefits, whether the maximum or a lower amount based on your earnings, you generally need:
- Be at least 62 years old (for reduced benefits) or full retirement age
- Have earned at least 40 Social Security work credits in your lifetime
- File an application for Social Security with the SSA
You earn one work credit for every $1,510 of income subject to Social Security tax, up to four credits per year. Most workers earn their 40 credits within 10 years.
Things that could reduce your Social Security benefit
Certain situations could prevent you from qualifying for the maximum Social Security benefit. These include:
- Having years with low or no earnings on your work record
- Claiming benefits before your full retirement age
- Having government pension income that was not subject to Social Security taxes
- Having retirement benefits from another country
Your basic benefit can also be affected by taxes owed on your Social Security income, Medicare premiums, and other deductions taken out of your benefit payment.
Factors to consider when claiming Social Security
As you approach retirement, here are some key factors to consider regarding when to claim Social Security:
- How long you expect to live – Delaying benefits can increase your monthly amount but reduce your lifetime amount if you have a shorter-than-average life expectancy.
- Other income sources – If you have significant income from pensions, investments, annuities etc. you may want to claim Social Security earlier.
- Health status – Filing earlier can make sense if you have certain medical conditions expected to limit your lifespan.
- Spousal benefits – Coordinating with your spouse on when to claim can maximize household benefits.
- Work status – You may want to delay claiming if you plan to continue working part or full time.
It’s a complex decision, so consider using Social Security claiming software or speaking with a financial advisor when making your choice.
Conclusion
The maximum Social Security benefit for someone retiring at full retirement age in 2023 is $3,538 per month, or $42,456 annually. This amount is for those who had maximum taxable earnings throughout their careers and delay claiming benefits until age 70.
Claiming early at 62 results in lower benefits, while delaying beyond your full retirement age up to 70 increases your benefit by 8% per year. But any Social Security income may be partially taxable by the federal government depending on your provisional income.
Through COLA increases, the maximum benefit amount has risen significantly over time and will continue to rise to help seniors maintain buying power. The key is looking at your own work history and estimated benefit to determine the optimal age to file for Social Security based on your personal situation.