The Social Security Administration sets 66 as the full retirement age for the purpose of calculating retirement benefits. The benefit amount depends on how much you earn during your working lifetime. However, there is an annual limit on how much work income is subject to Social Security taxes. Since the amount of earnings you are credited with has this limit, so does your Social Security benefit amount. In addition, the retirement benefit amount may be affected by other factors.
Regular Social Security Benefits
SSA uses your average monthly earnings during the 35 years you made the most money subject to Social Security taxes to calculate your benefit amount. The average adjusts to offset changes in wage rates over time. You receive a proportion of these adjusted earnings each month in retirement. The maximum monthly benefit was $2,642 in 2015, which works out to an annual figure of $31,704. This changes each year because SSA applies an annual cost-of-living adjustment. Benefits are figured on an individual basis. This means that if you and your spouse each earn enough during your working lifetimes, the combined monthly benefit can reach $5,284, or an annual total of $63,408.
Maximum Spousal Benefits
If you are married, your spouse can get Social Security benefits based on your benefit amount even if he doesn’t qualify on his own. A spousal benefit can be up to 50 percent of the primary beneficiary’s monthly payment. Since the 2015 maximum was $2,642, the maximum spousal benefit was $1,321 per month. When a spouse qualifies for benefits, SSA pays either his regular benefit or the spousal benefit, whichever is greater.
Early Retirement Benefit Reduction
SSA will pay retirement benefits starting the month of your 62nd birthday, but at a lower rate. The monthly benefit amount is reduced by a percentage based on the number of months remaining until you reach full retirement age. If you start benefits the month you turn 62, you only get 75 percent of the full amount. Thus, your maximum benefit is $1,981.50. The same rule applies to spousal benefits. If you start them at 62, the most you could get is $990.75.
Impact of Work on Benefits
When you start benefits early, the SSA will reduce your monthly benefit if you also work and earn more than a specified amount. In 2015 the monthly limit was $1,310, up from $1,290 in 2014. You lose $1 for every $2 you earn over the limit. During the calendar year you turn 66, the limit goes up and you lose $1 for every $3 in excess earnings. In 2015 this limit was $3,490, up from the 2014 level of $3,450. Once you reach full retirement age, earnings from work in any amount do not reduce your benefits.
Based in Atlanta, Georgia, W D Adkins has been writing professionally since 2008. He writes about business, personal finance and careers. Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.