Is There A Maximum Social Security Retirement Benefit Rate And If So Should I File Early?

Today’s Social Security column addresses questions about whether there really are “maximum” retirement benefit rates, whether applying for spousal benefits would have been advantageous and how the earnings test works. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc.

See more Ask Larry answers here.

Have Social Security questions of your own you’d like answered? Ask Larry about Social Security here.

Is There A Maximum Social Security Retirement Benefit Rate And If So Should I File Early?

Hi Larry, I am waiting until I am 70, in two years, to claim my Social Security benefit to maximized it. My SSA statement says that my benefit at 70 would be $4,025. I heard that the maximum benefit for 2022 is $3,895. Assuming that my projected benefit at 70 exceeds that maximum Social Security benefit, should I take my benefit before 70? It seems like waiting till 70 would not result in a higher payout. Do I have this right? Thanks, Steve

Hi Steve, There is no such thing as a “maximum” Social Security retirement benefit amount.

Social Security retirement benefits are based on an average of a person’s highest 35 years of Social Security covered wage-indexed earnings, and benefit rates can be recalculated after any year in which a person has a higher year of earnings. So a person’s benefit rate can potentially continue to increase indefinitely if they keep working. There is no ceiling to that amount.

I don’t know the reference for the so called “maximum” benefit amount cited in your question, but I suspect that amount represents the most that a person who turns 70 in 2022 could potentially receive if they earned the maximum Social Security covered earnings amount in all of the past 35 years and if they wait until 70 to start collecting. In other words, when you see something that refers to a supposed “maximum” Social Security benefit rate, it generally refers to the highest benefit rate that a person born in a given year could be due at a given point in time. But there is no statutory limit on the amount of anyone’s monthly benefit.

The fact is that you will continue to accumulate delayed retirement credits (DRCs) for each month that you delay starting your benefits until the month you reach 70. And each DRC will increase your benefit rate by 2/3rds of 1%. Again, there is no maximum or ceiling amount involved. If you start drawing your benefits before 70, you’ll simply lose the DRCs that you could have earned and your monthly benefit rate will be lower as a result. Best, Larry

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Should I Have Applied For Spousal Benefits?

Hi Larry, I’m still full time employed. My husband is retired. Should I have applied for spousal benefits? Thanks, Linda

Hi Linda, I can’t answer that without more information. First of all you don’t mention your age, so I don’t even know if you’re old enough to qualify for spousal benefits. Also, if you were born after 1/1/1954, you couldn’t apply for spousal benefits without being required to file for your retirement benefits at the same time.

And in that case, you wouldn’t qualify for spousal benefits unless your primary insurance amount (PIA) is less than half of your spouse’s PIA. A person’s PIA is equal to their Social Security retirement benefit rate if they start drawing their benefits at full retirement age (FRA).

Furthermore, if you’re working and if you’re still under full retirement age (FRA) then your benefits could be subject to full or partial withholding due to Social Security’s earnings test.

However, if you were born prior to 1/2/1954 and if you’re between FRA and 70, then you could potentially file just for spousal benefits only while allowing your own benefit rate to grow until 70. Your best filing strategy depends on a number of different factors, so you may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to ensure your household receives the highest lifetime benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

At What Age Can I Work While On Social Security?

Hi Larry, At what age can I work while on Social Security. I am receiving my benefits. I turned 66 in February. Thanks, Dave

Hi Dave, If you reached 66 in 2/2022, then your full retirement age (FRA) was 6/2022. So starting 6/1/2022, you could earn any amount of money and still be paid all of your Social Security benefits.

You may, though, have been able to collect benefits sooner than your FRA depending on how much you earned. For example, if your FRA was 6/2022 you could have earned up to $51,960 from 1/1/2022 through 5/31/2022 and still have been able to collect all of your Social Security benefits starting in 1/2022. However, if you started drawing benefits prior to FRA, your monthly benefit rate will have been permanently reduced for age. Best, Larry