What Is The Highest Possible Social Security Retirement Benefit Rate?

Today’s Social Security column addresses questions about how high benefit rates can possibly be, whether there’s a Social Security benefit increase for caring for a disabled spouse and the accuracy of Social Security’s benefit estimates. 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.

What Is The Highest Possible Social Security Retirement Benefit Rate?

Hi Larry, The Social Security site currently states that the maximum possible monthly retirement benefit for 2020 is $3,895. Yet their calculator shows an amount slightly over $4,000 if I delay until 70.

I’ve seen all kinds of different claims about this online but they all contradict one another. Which is correct? Thanks, Sidney

Hi Sidney, There is no single “maximum benefit rate.” The maximum possible benefit rate that a person could receive at any given time depends on their year of birth. Social Security retirement benefits are based on an average of a person’s highest 35 years of Social Security covered wage-indexed earnings, and the factors used to index earnings are different for each year of birth.

So in other words, if two people had the exact same earnings histories but if they were born in different years, their indexed earnings and their highest potential benefit rate would be different.

Furthermore, people who continue working and paying into Social Security can potentially keep increasing their Social Security retirement benefit rate indefinitely. Retirement benefits can be recalculated after any year in which a person earns more than they did in one of their previous highest 35 years of indexed earnings.

Therefore, the maximum possible benefit rate for each year of birth changes every year even before considering cost of living (COLA) increases.

You may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner. It accurately calculates your benefit rate based on your year of birth and any projected future earnings that you expect 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

If I Stay Home To Help My Disabled Wife Would I Be Eligible For Any Additional Funds?

Hi Larry, My wife is collecting Social Security disability and needs some help at home. if i chose to stay home to help her and collect my Social Security retirement benefit, are there any added funds available to me for that? I will turn 65 soon and I am not currently receiving Social Security. Thanks, Ben

Hi Ben, I’m sorry to hear about your wife’s impairment. I can only answer your question with regard to Social Security benefits, in which case the answer is no. Your Social Security retirement benefit rate would be calculated in exactly the same manner regardless of the reason that you stop working.

Since you were born after 1/2/1954, when you apply for Social Security benefits you could only be paid basically the higher of your own retirement benefit rate or your spousal benefit rate. In other words, you couldn’t claim spousal benefits and delay filing for your retirement benefits.

The only way that you’d qualify for spousal benefits is if your wife’s primary insurance amount (PIA) is more than twice as much as your own 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).

And regardless of whether you collect retirement or spousal benefits, if you claim benefits prior to your full retirement age (FRA) your benefit rate will be reduced for age. Best, Larry

Do You Have Any Thoughts On The Benefit Estimates On My Social Security Statement?

Hi, Larry, I elected to wait past 66 to start collecting my Social Security retirement benefits so the monthly payments will be higher. I’m still working and I have an old statement that says at age 66, I would receive about $2,575.

I recently checked my statement online and it now says at age 67, I will receive the same amount. It was my understanding that the longer one waits up to 70, the higher the monthly payout gets. Any thoughts on that? Thanks, Richard

Hi Richard, Your Social Security retirement benefit rate will increase by 2/3 of 1% for each month that you delay collecting benefits until 70 regardless of what your benefit statement says. So if you wait until 70 to start collecting, your monthly benefit rate will be 32% higher than the rate that you’d receive if you’d started collecting at your FRA of 66.

Benefit estimates are no more than that, and if your estimate says that you’d receive the same amount starting at age 67 as you would have at age 66 then the estimate is simply inaccurate. Best, Larry