What Is The Maximum Social Security Benefit For 2020?

Well before COVID-19 shut down the U.S. economy, America was facing a retirement crisis.   Strategizing to get the maximum Social Security retirement benefit will be the difference between a comfortable retirement and, perhaps, falling into poverty as you age. The amount of Social Security you will receive in retirement will depend on a combination of your age as well as your earning history. With tens of millions of workers filing for unemployment in just the past few weeks, quite a few people will be considering retirement, and others may be forced out of the workforce earlier than they would like.

If you find yourself out of work or just tired of the corporate grind, you might be tempted to begin drawing Social Security early. That is not a decision you should make lightly. While you may need extra money now, your options will be more limited as you age. If you don’t want to be working at 62, you really won’t desire to be working at 90.

Since the financial crisis, retirees have been waiting a bit longer to claim their Social Security benefits. Waiting can offer an immense boost to their financial security over their lifetimes. A few extra dollars will be harder to come by at 82 versus age 62. That positive trend may collapse faster than oil prices did last month as seniors struggle to find work or pay for basic necessities.

Before we go into the maximum benefits below, I would like to point out that the average Social Security check is around $1,503 per month, for the year 2020. The average person retires around age 62, and that is not always by choice. People often leave the workforce because they can’t find work, or they have underlying health conditions. Hopefully, you are not in that boat and are taking a proactive approach by planning for a secure and well-funded income stream in retirement. Optimizing Social Security will likely be a significant part of a retirement income that you can’t outlive.

What Is The Maximum Social Security Benefit at Age 62?

The earliest age you can file for Social Security retirement benefits is age 62. For those who file for Social Security in 2020, the maximum they could receive at age 62 is $2,265 per month.  Before you get excited, if you had the income history to get the maximum Social Security benefit in 2020, that would represent a significant drop in your income during retirement, assuming you don’t have substantial assets to make up the difference. 

If you are financially independent and retiring early by choice, claiming Social Security at 62 may make sense. On the other hand, if you find yourself out of work and looking for money to get by, look for alternatives. Give the economy time to recover from the coronavirus pandemic so that you can go back to work.  Exhaust all stimulus checks, unemployment, severance, or even unused vacation pay that may be at your disposal. 

In case you were wondering if you turn 62 this year, your full retirement age is 66 and 8 months.

What is the Maximum Social Security Benefit at Age 67?

When it comes to Social Security for the year 2020, the full retirement age is 66 and 2 months. For most people reading this, your full retirement age will likely be closer to 67. That being said, the maximum Social Security benefit for someone at full retirement age in 2020 is $3,011 per month.

If you are in this age range and find yourself out of work, you should still exhaust any stimulus payments and unemployment. At this age, you probably are not that far from when you planned to retire. I’ve worked with several clients this year who were able to move up their retirement dates because they had severance packages. Sometimes good things can come out of the worst situations.

What is the Maximum Social Security Benefit at Age 70?

The numbers start to be a bit better for those who are patient and wait to claim Social Security later. At age 70, the maximum Social Security benefit is $3,790, per month, in 2020. For those who have a comprehensive retirement plan, that will provide a base income that you cannot outlive. Again, if you have earned the revenue required to get the maximum Social Security benefit at age 70, that will still not be enough for you to maintain your standard of living in retirement.

For the vast majority of Americans, when to take Social Security is a choice they get to make. However, those who wait to receive benefits will no longer have a choice once they reach age 70. That’s because 70 is the latest age at which you can start claiming benefits. Even for those fortunate enough to not need the money, they will be forced to claim Social Security at age 70.

If you are still working, claim Social Security at age 70, and use the money to top off your retirement contributions. That is an excellent problem to have. I bet a few of you are rolling your eyes, but I know quite a few people who are still working, by choice, well into their seventies, and I have a few clients who are still working in their eighties. They are fortunate to have careers they love and the health to keep working. 

Related: Click Here to Get a Free Copy of Financial Planner LAs Ebook- How To Get Your Financial House In Order

How To Get An Estimate Of Your Future Social Security Benefits?

Depending on your typical income from working, you may find the maximum Social Security benefits listed above as huge or frighteningly small. Either way, you should get an estimate based on your work history and targeted age of retirement. You can register for a free my Social Security account and receive personalized estimates of future benefits.

MORE FROM FORBESWill COVID-19 Threaten Your Social Security Benefits?

Financial Clawbacks When Taking Social Security Before Full Retirement Age

If you choose to take Social Security before your full retirement age and then go back to work, you may see some of your benefits clawed back. Assuming you are younger than your full retirement age for the entire year, the Social Security Administration (SSA) will deduct $1 of benefits for every $2 of income above the annual limit. In 2020, the yearly limit is $18,240. 

During the year in which you reach full retirement age, the SSA will deduct $1 for every $3 you earn above the annual limit. For 2020, the limit is $48,600. The good news is only the earnings before the month in which you reach your full retirement age will be counted.

There is no reduction in benefits once you reach full retirement age, regardless of how much or little you earned. Of course, your other income source will affect how your Social Security benefits are taxed

There are many myths when it comes to optimizing Social Security benefits. Not everyone should wait until age 70 to claim benefits. For those with other retirement income, Social Security is not a tax-free benefit. What I do think everyone should be aware of is how drastic the difference is between claiming at 62 versus age 70. Which would provide you with more retirement security ($2,265 per month, or $3,790, per month)? The choice isn’t as clear as just getting the largest check.

Work with your fiduciary financial planner to develop a retirement income plan that you can’t outlive, and make sure that plan includes the optimal age to claim Social Security for your personal situation. If your so-called financial adviser isn’t willing or able to help, find someone who can. You worked 40+ years for this benefit and deserve nothing less than the maximum Social Security benefits you are entitled to receive.

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