Social Security: Maximum monthly benefit and a few related tidbits
This post seeks answers to these questions:
- Assuming full retirement age, what is the theoretical maximum for todays social security benefit?
- About how much have I forgone by retiring in my late 40s?
Recently I called the Social Security Administration to request an update to my estimated benefits statement (SSA's number is 1-800-772-1213). This information was needed as an input variable for Fidelitys retirement planning tool.
Today I received a statement from SSA. Armed with their numbers and a few minutes of research on the Web, heres what I found:
- Today's average retirement benefit: According to ElderLawAnswers, for 2005, the average retirement benefit is about $955 a month.
- Todays maximum retirement benefit: According to ElderLawAnswers, the maximum monthly Social Security benefit for a worker retiring at the full retirement age (65 years and six months in 2005) is $1,939.
- My approximate loss of benefit for retiring early: Assuming I earn no additional income, my SSA benefit at full retirement age is estimated to be $1,675 / month. Here are some of the assumptions that go into this number:
- - For me at age 49 today, full retirement is 66 and 2 months.
- - SSA's benefit projections are in 2005 dollars. The actual benefit amount should continue to grow based on SSAs Cost of Living Adjustments.
- - While I currently work part-time, for planning purposes, I chose to ignore this income (after FLEX, my income is relatively modest).
- - This number is based on my earning history. Your number will likely differ.
- - SSA projects a budget shortfall of 26% by 2041. As a cautious investor, I must assume there is a significant probability that I will not receive 100% of my projected benefit.
So what is the cost in terms of social security benefits for retiring early? Based on my situation, the maximum cost appears to be a 13.6% reduction.
Note: There have been years when I did not reach the maximum social security income. So 13.6% is the maximum Ive given up. The actual percentage is probably a little less. While the number may not be exact, it's close enough to satisfy my curiosity.
Read the ElderLawAnswer's article...
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