Can you get the maximum Social Security benefit when you apply in advance at 62? | Smart Change: Personal Finance

(Kailey Hagen)

The maximum Social Security benefit in 2022 is $ 4,194 per month, over $ 50,000 per year. But very few will ever see checks of this size. You would need a pretty high income to make it, and that’s not the only requirement. You also have to claim at a specific time. Here’s a closer look at what needs to be done to apply for the largest allowances offered by the Social Security Administration.

How the government calculates your social security benefit

The first step in calculating your Social Security benefit is to calculate your Average Indexed Monthly Earnings (AIME). The government does this by adding up your earnings over the 35 years with the highest earnings, adjusted for inflation, and dividing them by 420, the number of months in 35 years. But there is a problem with high earnings.

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The government only counts the money you paid social security taxes on in a given year and it’s not always the same as your income. In 2022, for example, you pay Social Security taxes on only the first $ 147,000 you earn. So, whether you make $ 150,000 or $ 1 million, the government will only count $ 147,000 when evaluating your income for that year.

Once the government has your AIME, they put it into a benefits formula, which varies based on your birth year. The current formula of the social security allowance looks like this:

  1. Multiply the first $ 1,024 of your AIME by 90%.
  2. Multiply any amount above $ 1,024 up to $ 6,172 by 32%.
  3. Multiply anything over $ 6,172 by 15%.
  4. Add up the results from steps 1 through 3 above and round down to the nearest multiple of $ 0.10.

In the example above, $ 1,024 and $ 6,172 are known as fold points. These change every year. The folding points you will use are those in effect for the year you turned 62. Here is a table where you can see all the fold points for previous years.

The results of the formula above show what kind of benefit you will get at your full retirement age (FRA). It ranges from 66 to 67 years, depending on the year of birth. You must wait until this age to apply for Social Security if you want the full benefit you are entitled to based on your work history.

Whether you apply earlier or later, the government manages the amount of your main benefit, the amount you are eligible for at your FRA, through another formula.

Each month you claim benefits under your FRA reduce your allowances. Those who sign up early at 62 get only 70% of their full benefit per check if their FRA is 67, or 75% if their FRA is 66. Delaying Social Security increases your benefit to 70, when you qualify for your biggest checks. This is 124% of the entire benefit per check if your FRA is 67 or 132% if your FRA is 66.

What it takes to take home the $ 4,194 checks

To earn the maximum $ 4,194 Social Security Checks, you have to go through practically every step of the way. First, you need to reach the maximum AIME, which means earning the equivalent of $ 147,000 in $ 2022 in at least 35 years. Hence, you should wait up to 70 years to register.

For most people, this isn’t feasible, and even if it were, it might not always be smart. If you have a terminal illness, for example, you may not receive anything from Social Security if you wait up to 70 years to apply.

But just because you don’t qualify for maximum benefit doesn’t mean you’re doomed to small allowances. You can use the information we discussed above to pursue your maximum benefit.

To get started, take every opportunity you can to increase your income today. This will help strengthen your AIME and lead to greater social security checks at any age. You may be trying to negotiate a raise, find a better-paying job elsewhere, or start a hustle and bustle to earn extra cash.

Try to stay in the business world for at least 35 years if you can. This will prevent zero-income years from ruining the benefit calculation. If possible, consider working even longer. You will likely earn more at the end of your career than at the beginning. After passing the 35 year mark, the most recent and higher earning years replace the previous and lower earning years in the benefit calculation.

Finally, choose your starting age carefully. If you have a short life expectancy, signing up early is usually wise. Those who expect to reach their 80s often get more life-long benefits by delaying for a while, but this may not be financially feasible for you. While you may be delayed for a few months, however, it can lead to bigger and bigger checks.

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