A reader writes in, asking:
“I often hear how smart it is to wait until I turn 70 to begin taking my SS benefit. But I have also read that there is a maximum possible benefit. How can I be sure that I won’t run into that maximum before age 70?”
This is a common misunderstanding of what is meant by a maximum benefit. There are two different maximum benefits that you might read about (more on those below), but, to be clear, neither one gets in the way of you waiting until age 70 to file for your retirement benefit.
That is, there is no rule that stops you from accumulating delayed retirement credits (prior to age 70) due to having run into some maximum. Said yet another way, your own maximum retirement benefit, for a given level of earnings history, will occur if you file at age 70, not prior to age 70.
Family Maximum Benefit
There’s a “family maximum benefit,” which is calculated based on your primary insurance amount (PIA). But the family maximum rules are never relevant unless either a) you’re disabled or b) somebody other than just you and your spouse (e.g., a minor child) would be claiming benefits on your work record.
Also, waiting to claim your benefit will not cause you to run afoul of the family maximum benefit rule. For the purpose of the family maximum benefit rule, you are assumed to be receiving 100% of your PIA, regardless of when you file for your own retirement benefit. (So, for example, if the family maximum benefit on your PIA is 180% of your PIA, the amount “left” for the rest of your family is 80% of your PIA, even if you are receiving more or less than 100% of your PIA due to having filed early or late.)
Maximum Primary Insurance Amount
There’s also a maximum average indexed monthly earnings (AIME) — and therefore a maximum PIA — for a person born in a given year. Essentially this is what your AIME would be if you worked your entire life and earned the maximum amount subject to Social Security tax each year.
Here’s one such example from the SSA website:
“For example, a person who had maximum-taxable earnings in each year since age 22, and who retires at age 62 in 2020, would have an AIME equal to $10,683. Based on this AIME amount and the bend points $960 and $5,785, the PIA would equal $3,142.70.”
Again, this is not relevant to the decision of when to file for benefits.
Your PIA is what it is. And you can receive more or less than your PIA depending on when you file. For example, the person in the example above would receive less than $3,142 if they file before their full retirement age, and they would receive more than $3,142 if they file after their full retirement age.