If you're ready to collect Social Security, the Social Security Administration will calculate your monthly benefit by applying a formula to your lifetime earnings record. The benefit rises when Congress passes annual cost of living adjustments. In general, the higher your earnings while in the workforce, the higher your benefit amount. But the monthly payment is also subject to minimum and maximum amounts, which have changed regularly over the years.
The Special Minimum Benefit
For retirees drawing Social Security, the rules set a floor known as the special minimum benefit. This calculation is designed to support people who have earned relatively low wages throughout their working lives. Very few retirees actually earn the minimum, as the primary insurance amount used to calculate benefits, and which depends on a lifetime earnings record, will almost always result in a higher monthly benefit. According to the [Congressional Research Service], (http://fas.org/sgp/crs/misc/R43615.pdf) only 1 in 1,500 Social Security recipients received the special minimum benefit in 2013.
Calculating the Minimum Amount
The special minimum benefit reached $829.80 for a worker with 30 years of coverage in 2015. A "year of coverage" is a year in which the worker earned over a certain threshold, which in 2015 reached $13,230. Only workers with 11 or more years of coverage are eligible for the special minimum benefit. This minimum rises with the number of years of coverage, and starts at about $40 for those with just 11 years.
Maximum Benefit Amounts
The Social Security rules set a fairly narrow band of monthly benefit amounts, and the maximum applies no matter how much you earn. In addition, the maximum varies with the age at which you begin taking Social Security. Retiring early means a reduced monthly benefit as well as a lower maximum amount. In 2015, for example, the maximum monthly benefit for those beginning their benefits at age 62 stood at $2,014.
Full Retirement Age and Family Maximums
Waiting until full retirement age to collect Social Security means a higher monthly amount. If the spouse or children of a retired worker are eligible for their own benefits on the worker's record, then the entire family is subject to a family maximum amount. This ranges from 150 to 187 percent of the worker's benefit. This doesn't apply if two spouses are both eligible to receive benefits on their own records. Both would draw their full monthly benefit, and be subject to the individual maximum.
- Social Security Administration: Old-Law Base And Year Of Coverage
- Social Security Administration: Special Minimum Benefit
- Social Security Administration: 2015 Social Security/SSI/Medicare Information
- Social Security Administration: Formula for Family Maximum Benefit
- Congressional Research Service: Social Security -- Minimum Benefits
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