Complete Guide To Maximizing Your Social Security Benefits

September 25, 2023 | By Jon Powell, CFP®| Retirement Solutions

As the primary retirement program in the United States, Social Security currently benefits 66 million people, 51 million of them retirees and dependents.

It also serves 8 million workers with disabilities and 5 million survivors of deceased workers.

The program began with the Social Security Act in 1935, part of President Franklin Roosevelt’s “New Deal” response to the Great Depression.

It is administered by the Social Security Administration (SSA), an independent federal agency that operates through 1,200 field offices nationwide, as well as its website and 37 Teleservice Centers.

How Social Security Benefits Work

Social Security is not a pension plan, but rather an insurance plan to supplement a retired worker’s pension and savings. In 2022, about 182 million workers contributed to the program through Social Security taxes.

Most of those taxes are paid through employers’ payroll withholding, while self-employed workers pay Social Security taxes when filing their federal income tax returns.

The amount retirees receive depends on their pre-retirement income and the age at which they choose to begin receiving benefits.

To be eligible for Social Security, workers must have earned 40 credits. One credit is earned for earnings of $1,640 in 2023, with a maximum of four credits for earnings of $6,560 available per year. Thus a person who earns four credits per year for 10 years is eligible for Social Security.

The amount of your Social Security benefit is based on your highest 35 years of earnings. Workers with fewer than 35 years of earnings will receive lower benefit amounts because years without work represent zeroes in benefit calculations.

How Social Security Benefits are Calculated

To compute your benefit, Social Security indexes your actual earnings using the national wage indexing series. The goal is to make future benefits reflect the changing standard of living during the person’s lifetime.

Social Security then takes your average indexed monthly earnings from your highest 35 years of work and applies a formula to determine the benefit you will receive at your full retirement age (FRA), currently between 66 and 67 depending on your year of birth.

Your actual benefit changes depending on when you begin to start them. Turning benefits on before your full retirement age will lower the benefit amount while turning them on after the full retirement age will raise them.

The Maximum Social Security Benefit

For people who begin taking Social Security retirement benefits at the full retirement age in 2023, the maximum benefit amount is $3,637 per month.

For those who start receiving Social Security this year at age 70, the maximum Social Security benefit is $4,555. Meanwhile, for 62-year-olds who begin benefits this year, the amount is $2,572.

Social Security Special Minimum Benefit

Stemming from legislation enacted in 1972, the Social Security special minimum benefit provides low-earning workers with a primary insurance amount (PIA).

For 2023, the lowest PIA available for at least 11 years of work is $49.40 per month. For workers retiring after 30 years of earnings, the PIA is $1,033.50 per month.

Unlike regular Social Security retirement benefits, special minimum benefits are calculated not on income but solely on the number of years worked.

People who turn on benefits early will receive a lower benefit. Those who retire late will not receive a higher benefit—unlike regular Social Security.

Full Retirement Age

For people born between 1943 and 1960, the full retirement age increases gradually up to age 67. People born in 1955 have already reached the full retirement age in 2023. Below is a chart showing the full retirement age for people born in this period.

Year of birth Full retirement age
1943-1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 or later 67


Cost-of-living Adjustments (COLA)

Social Security retirement benefits increase as the cost of living rises. The increase is based on the Department of Labor’s Consumer Price Index (CPI-W). The goal is to keep benefits in line with inflation, offsetting a higher cost of goods and services with higher benefits.

In 2023, retirees received a large increase in their Social Security benefits of 8.7 percent, an average of $140 per month.

Determining the Best Age to File for Social Security Benefits

As noted above, retiring early lowers the benefit amount, while deferring retirement past the full retirement age raises it. The earliest you can begin receiving benefits is age 62, but the benefit amount is reduced by about 7 percent per year for each year prior to the full retirement age.

The chart below lists the percentages, with the full retirement age of 66. At age 62, a person receives 75 percent of the full benefit.

62 75%
63 80%
64 86.7%
65 93.3%
66 100%
67 108%
68 116%
69 124%
70 132%

The question is, if you turn on benefits at the earliest age, 62, at what age will you break even, or begin wishing you hadn’t retired early? In general, that age is between ages 78 and 82.

So among the questions people should ask is, what is their likely longevity in terms of health and longevity in their family history? For people with less-than-perfect health and parents who died before age 85, turning on benefits early might make sense.

Equally important are what other retirement assets the person has accumulated and what the person’s retirement plans are.

Another question is whether or not you plan to continue working. If you turn on benefits early, you face an “earned income penalty” if you earn over a certain amount, set by the SSA.

In determining whether or not to defer benefits past the full retirement age, or to increase the benefit amount, similar questions should be asked.

How to File for Social Security

Follow these simple steps to apply for Social Security retirement benefits.

  1. Make sure you want to apply at your current age.
  2. Check to make sure you are eligible.
  3. Collect the required documents.
  4. Complete the application.
  5. Monitor your status.

You can get all this started by calling the Social Security Administration at 1-800-772-1213 or by filing online at

Social Security Planning

It is never too early to begin planning a Social Security strategy. In fact, delaying can be costly, a price that retirees will be stuck with for the rest of their lives. To navigate the complexities of retirement and Social Security, it’s best to consult an accounting professional.

Social Security FAQs

1. What are Social Security credits and how are they calculated?

The Social Security Administration uses a credit system to determine eligibility for Social Security benefits. For 2023, a person gets one credit for each $1,640 in earnings, up to a maximum of four credits, or $6,560.

To become eligible a person must have earned 40 credits. Thus a person must work for at least ten years to become eligible for retirement benefits.

2. Can I receive Social Security benefits while I’m still working?

Yes, you can receive Social Security retirement benefits and work at the same time. However, your benefit amount may be reduced if you earn above a limit set by the Social Security Administration.

3. What is the payout percentage difference between filing at full retirement age and minimum filing age?

The minimum filing age is 62, but the benefit amount is reduced by about 7 percent per year for each year prior to the full retirement age. The chart below lists the percentages of full retirement benefits by age of retirement, with the full retirement age at 66.

62 75%
63 80%
64 86.7%
65 93.3%
66 100%
67 108%
68 116%
69 124%
70 132%

4. Do I have to pay taxes on my social security benefit?

Possibly. You must pay taxes on up to 85 percent of your benefit if (a) you file your federal tax as an individual and your combined income is above $25,000, or (b) you file jointly with a spouse and your combined income exceeds $32,000.

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