October 22, 2021
  • October 22, 2021

Here is the maximum social security benefit in 2021

By on July 2, 2021 0

If you retire and qualify for maximum Social Security benefits, you could pocket $ 3,895 per month in Social Security income in 2021. However, you will only collect this amount if you start receiving benefits. at age 70 or over. The maximum amount you can collect this year if you file at age 62 is $ 2,324, and the maximum amount paid if you are 66 is $ 3,113.

However, you should be aware that the Social Security formula is complex and the collection of the maximum allowance depends on many factors, including the length of your employment history. Here’s how Social Security calculates the maximum benefits and what you can do to get the highest possible payment.

Image source: Getty Images.

How Social Security Calculates Benefits

Social Security benefits are based on how many years you worked, how much payroll tax you earned during your career, and when you start receiving benefits.

You can start receiving benefits from the age of 62, but you will only receive 100% of your benefit amount if you apply for Social Security at full retirement age, which ranges from 66 to 67 years for people born after 1943. before full retirement age, the amount of your benefit is reduced. If you claim later than the full retirement age, your benefit is increased due to the delay in retirement credits.

To determine if you qualify for maximum Social Security benefit, Social Security adjusts your historical annual income for inflation, then calculates your average monthly income based on your highest 35 years of income. If you don’t have 35 years of income, zeros are included in the formula for those years, reducing your benefit and ensuring that you won’t be entitled to the maximum amount possible.

Once Social Security calculates your average monthly income, it reduces that amount to specific income levels called curvature points to determine the amount of your primary insurance, or the benefit you will receive if you apply to the Social Security. full retirement age.

As I mentioned, if you apply before full retirement age, your primary insurance amount is reduced. Specifically, it’s lowered by five ninths of 1% per month for the first 36 months of your early request and five twelfths of 1% for each additional month you request early. Alternatively, if you delay payment of benefits until full retirement age, your benefit is increased by two-thirds of 1% for each month late, up to age 70, due to delayed retirement credits. This is why the maximum benefit payable varies depending on the age you are when you first apply for social security.

How to maximize your social security

The Social Security formula makes it difficult to qualify for the maximum benefit. Not only will you need to have 35 years of work experience, but you will also need to have earned income at or above the annual tax limit over all those years. It’s no small feat considering the average American worker earns around $ 51,000 a year, but the maximum taxable limit for Social Security is $ 142,800 in 2021.

Nonetheless, there are strategies you can use to make sure you get the greatest possible benefit even if you don’t qualify for the maximum Social Security amount.

For example, working at least 35 years eliminates zeros in calculating your average monthly income, and delaying retirement may allow you to replace low-income years early in your career with higher-income years later in your career. life, also increasing your benefits.

You can also wait up to age 70 to start receiving benefits to take advantage of the increases associated with deferred retirement credits. The difference between claiming benefits at 62 and at 70 is considerable. For example, if your full retirement age is 67 and your full retirement benefit is $ 1,000, you will only receive 70% of your full retirement benefit, or 700 $ per month, if you apply at age 62. However, if you wait to claim until age 70, you would receive 124% of your full retirement benefit amount, or $ 1,240 per month. That’s 77% more money than you would have collected at 62.

One last thought

Because it is so difficult to qualify for the maximum Social Security benefit, the amount you are entitled to may be less than your retirement goals. Consider this point: The average retired worker receives only $ 1,554 in benefits in 2021, or about $ 18,644 per year. This isn’t a stupid change, but it probably won’t allow you to live a life of luxury, so it’s important to consider Social Security planning strategies.


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