Max Social Security Benefit

[TNBigfoot]

I’m a bit confused around the SS max benefit. In 2019, the max is $2861. When I use the benefit estimator on ssa.gov, at FRA, I see a benefit of $3015/mth. It is not additional income projected from now to FRA as I run the estimate with $0 as income from my retirement age. Either some estimate of COLA is included or there is a table for the max benefit with yearly increases built in. Any ideas for the discrepancy.

Also, as I look at my claiming strategy on opensocial security.com, the model returns an optimum strategy for my spouse to claim at 62 (minimal income over working career) then filing for the spousal benefit when I claim. If she does claim in this manner, will it reduce her total benefit including spousal when I file?

Thanks so much for your wisdom!

 

[joeea]

I’m a bit confused around the SS max benefit. In 2019, the max is $2861.

The maximum monthly Social Security benefit that an individual can receive per month in 2019 is $3,770 for someone who files at age 70.

Also, as I look at my claiming strategy on opensocial security.com, the model returns an optimum strategy for my spouse to claim at 62 (minimal income over working career) then filing for the spousal benefit when I claim. If she does claim in this manner, will it reduce her total benefit including spousal when I file?

No. Her total benefits will not be reduced, no matter what strategy she uses.

 

[SevenUp]

No. Her total benefits will not be reduced, no matter what strategy she uses.

Not sure what is meant by "total benefits" but according to ssa.gov If the spouse begins receiving benefits before "normal (or full) retirement age," the spouse will receive a reduced [spousal] benefit.

 

[MissMolly]

Yes, if she files for benefits at 62 both her own benefits will be reduced and her spousal benefits will be reduced.

 

[SevenUp]

I’m a bit confused around the SS max benefit. In 2019, the max is $2861. When I use the benefit estimator on ssa.gov, at FRA, I see a benefit of $3015/mth. It is not additional income projected from now to FRA as I run the estimate with $0 as income from my retirement age. Either some estimate of COLA is included or there is a table for the max benefit with yearly increases built in. Any ideas for the discrepancy.

A couple of spreadsheets and a web tool that work well for calculating an individual's benefit:
- The 'SocialSecurity' tab of the case study spreadsheet.
- The Downloadable Social Security Benefit Estimator (repost) - Bogleheads.org.
- Social Security Calculator

The first of those has all the formulas viewable if you want to look at the gory details.

 

[joeea]

Not sure what is meant by "total benefits" but according to ssa.gov If the spouse begins receiving benefits before "normal (or full) retirement age," the spouse will receive a reduced [spousal] benefit.

Sorry. I interpreted the OP meant "will it reduce her total benefits" (ie, her own + spousal) later when the OP files, compared to what she got when she started at 62. The answer to that is "No".

(" the model returns an optimum strategy for my spouse to claim at 62 (minimal income over working career) then filing for the spousal benefit when I claim. If she does claim in this manner, will it reduce her total benefit including spousal when I file?")

 

[Rianne]

Open SS is the best way to understand SS benefits for you, spouse and spouse survivor benefits. It's been posted here before.

https://opensocialsecurity.com/

 

[dtbach]

Just be aware that the "restricted" spousal benefit option goes away unless you born before Jan 2, 1954

 

[Finance Dave]

yes the reason your estimated amount in the future is higher than the max for 2019 is due to COLA.

 

[almost there]

Whats the life expectancy used on that site? Didn't see it listed.
Just "2032 and beyond"
Thanks

Open SS is the best way to understand SS benefits for you, spouse and spouse survivor benefits. It's been posted here before.

https://opensocialsecurity.com/

 

[Red Badger]

Yes, if she files for benefits at 62 both her own benefits will be reduced and her spousal benefits will be reduced.

+1.

My SAHM DW just applied for her spousal benefit at FRA and I filed at same time (62+). Had she filed earlier (and I would have had to file for her to apply), her spousal benefit would be permanently reduced. Her spousal bennie is 50% of my PIA (the max allowed).

 

[joeea]

Whats the life expectancy used on that site? Didn't see it listed.

You can use the Advanced Options and set the "Assumed age at death" to any number you choose.

Otherwise, by default it uses the "2016 Social Security Period Life Table". see: https://opensocialsecurity.com/about/#mortality for a really good explanation.

It's an excellent tool.

 

[joeea]

+1.

My SAHM DW just applied for her spousal benefit at FRA and I filed at same time (62+). Had she filed earlier (and I would have had to file for her to apply), her spousal benefit would be permanently reduced. Her spousal bennie is 50% of my PIA (the max allowed).

And since you filed early, if she survives you, her survivor benefit will be permanently reduced. That might not matter if her own benefit is larger than the reduced survivor benefit. She'll get the larger of the two.

Spousal and survivor rules are different. They can both be complicated.

 

[Perryinva]

yes the reason your estimated amount in the future is higher than the max for 2019 is due to COLA.

I am pretty sure this is incorrect. Future estimates at SSA do not include future COLA estimates. Increases to the max benefit, even when all future incomes are 0, are because up until one turns 62, the bend points are recalculated every year, based on a formula that uses the 40year prior average wage index and two years earlier wage index. The bend points are specific to each years FRA calculation. SSA does estimate a certain wage index growth against the known past values (half guess) and apply that to all the years left between current calculated benefit and age 62. Along with the bend points increase, is the automatic increase of each previous years indexed yearly wage, the top 35 of which are added together to calculate your new indexed monthly lifetime earnings which is what is used with the higher bend points to calculate your PIA. So with 35 years maxed earnings, even with no new earnings, the total and monthly increases each year, so the estimate is higher based on those yearly increases.

However, each year THAT estimate is again increased once the COLA (if there is a COLA) is applied. If you were to go online each month and check your FRA benefit while working, you would see that the FRA estimated amount increases twice each year, once when the new earnings are added (if any) which includes the new bend points and then again when that years COLA is applied.

Once you turn 62, and all your future earnings are zeros, the FRA estimate no longer increases because your indexed values and bend points are fixed for your FRA year. From then on the only increases are COLA, after they are applied, right up until you file.

So to the OP, the current max benefit (which is PIA MAX, not delayed credit max) is for those whose FRA is in 2019. Once you turn 62, that year will be for those who’s FRA are that year, and your estimate will be very close, for your FRA 5 years later, as only COLAs will increases it as they occur. For a max earner, even small COLAs per year can add up rather nicely. Even 1%/year is an extra ~$150/mo at FRA. But it is entirely possible to have no COLAs, of course.

 

[bolt]

I'd suggest reviewing Mike Pipers publications as well as others like Devin Carolls publication.
Mike Piper
https://www.amazon.com/Social-Security-Made-Simple-Retirement/dp/0997946512
Devin Caroll https://socialsecurityintelligence.com/2021-the-year-social-security-changes-forever/

Heres a .gov SS formula:
B(a)=PIA(a) x (1-e) x (1+d) x Z(g)+max((5xPIA*(g)-PIA(g) x(1+d) x E(a),o) x (1-u(a,q,n,m)) x D(a)

.Gov does not pay its staff well enough to do this level of algorithmic calculations competently for alls best cumulative lifetime benefit or benefits if your married imo.

However the .gov online ss application says its only takes 15min to select your LIFETIMES earnings benefit.
Really now... meh?
DIY Then I'd incentivize a couple of enrolled agents/tax/ss professionals for opinions & numbers. jmho

There are many variables and .gov data shows near 75% receive less than optimum aggregate levels that are usually permanent.
Fed & state taxation matters also.

Good Luck!

 

[Finance Dave]

I am pretty sure this is incorrect. Future estimates at SSA do not include future COLA estimates. Increases to the max benefit, even when all future incomes are 0, are because up until one turns 62, the bend points are recalculated every year, based on a formula that uses the 40year prior average wage index and two years earlier wage index. The bend points are specific to each years FRA calculation. SSA does estimate a certain wage index growth against the known past values (half guess) and apply that to all the years left between current calculated benefit and age 62. Along with the bend points increase, is the automatic increase of each previous years indexed yearly wage, the top 35 of which are added together to calculate your new indexed monthly lifetime earnings which is what is used with the higher bend points to calculate your PIA. So with 35 years maxed earnings, even with no new earnings, the total and monthly increases each year, so the estimate is higher based on those yearly increases.

However, each year THAT estimate is again increased once the COLA (if there is a COLA) is applied. If you were to go online each month and check your FRA benefit while working, you would see that the FRA estimated amount increases twice each year, once when the new earnings are added (if any) which includes the new bend points and then again when that years COLA is applied.

Once you turn 62, and all your future earnings are zeros, the FRA estimate no longer increases because your indexed values and bend points are fixed for your FRA year. From then on the only increases are COLA, after they are applied, right up until you file.

So to the OP, the current max benefit (which is PIA MAX, not delayed credit max) is for those whose FRA is in 2019. Once you turn 62, that year will be for those who’s FRA are that year, and your estimate will be very close, for your FRA 5 years later, as only COLAs will increases it as they occur. For a max earner, even small COLAs per year can add up rather nicely. Even 1%/year is an extra ~$150/mo at FRA. But it is entirely possible to have no COLAs, of course.

Long explanation, but why do they recalculate bend points? Wage index...so basically an inflation adjustment (for wages)...call it what you like.

 

[sanfanciscotreat]

Max SS benefit is received when one has paid the max in for all years used to compute benefits and delays to age 70. A friend now receives 43000 per year and he did not pay in the max all of his career. So the max one can receive now is higher than that.

 

[SevenUp]

Max SS benefit is received when one has paid the max in for all years used to compute benefits and delays to age 70. A friend now receives 43000 per year and he did not pay in the max all of his career. So the max one can receive now is higher than that.

See https://www.ssa.gov/oact/cola/examplemax.html for some examples.

 

[hulurt1]

I'm 66. If I take mine now I'll get 1600 a month. My wife is 63 and at 70 will get close to 3000 a month if she dies now would I get her SS at 2000 or would I get 3000.
So if I take now and she dies at 70 would I get her 3000 or have to stay at 1600?
At 70 I'll get 2200 from mine. Take now or weight. I can live without my SS

 

[MissMolly]

Since you are 66 you are at full retirement age, so there won't be any reduction. If your wife dies first you have choices. You can either claim survivor benefit and get whatever amount she would have gotten at her full retirement age and then you can let yours grow to age 70 (assuming your age 70 amount is higher than her full retirement age amount). Or, if your wife dies at age 70 (or anywhere between full retirement age and age 70) your survivor amount would be whatever she was entitled to draw on the day of her death.

 

[joeea]

I'm 66. If I take mine now I'll get 1600 a month. My wife is 63 and at 70 will get close to 3000 a month if she dies now would I get her SS at 2000 or would I get 3000.
So if I take now and she dies at 70 would I get her 3000 or have to stay at 1600?
At 70 I'll get 2200 from mine. Take now or weight. I can live without my SS

Try your numbers using:
https://opensocialsecurity.com/

 

[Perryinva]

To FinanceDave: I don’t see how you can equate the national average wage index to COLA. About the only thing they have in common is that they tend to increase and are based on the economy. But then, so is about everything. There have been plenty of years when COLA was zero and the index increased and years (relatively few) when the index went down and COLA increased. I’m not calling anything what I want, I am using the SSA terms. BEnd points are calculated for each year by SSA rules. Every year, so that that years filers are up to date. The important take away is that the index has been increasing every year of your normal working life, and then suddenly at 62, that stops. Most people are not aware that happens. If they have been working, they watch their SS estimate increases every year, then suddenly it stops or slows down tremendously, even if they are working and replacing lower older years with new higher ones. So the general increases in predicted estimates are not from future COLAs, but from those bend point changes. Increases from COLA are a separate increase.

 

[Finance Dave]

Thanks Perry. My point to the OP was that the change between max benefits now and in the future is not related to any Congressional action or more "fruitful" benefits, but rather related to the formula for SS. I incorrectly stated it as COLA, whereas you correctly stated it as the bend points...but both are related to the general economy and inflation...just that mine is related to COLA (buying side of things) and you correctly stated it's related to the bend points, which are more related to wage inflation (purchasing side of things) in the formula.

 

[Perryinva]

Ahh, sorry, I didn’t catch that! Yes, you are 100% correct there; there is no ROI or bene that causes the increases. It is unpredictable and based on results from whatever the economy is doing.