Q & A
Is there really a maximum Social Security benefit? That can’t be right!
Complete Question: I made a very good living all my life and expect to retire in a few years. I just assumed that since I paid a percentage of my salary in Social Security taxes, that it would be enough money for me to live off of when it came time for me to retire. Now I hear that there’s a maximum benefit. Is that true?
Answer: Yes, this is true. As you may know, your salary is taxed at a rate of 6.2% to pay for Social Security (NOTE: this does not include Medicare). In 2014, the maximum benefit a person can receive at full retirement age (FRA) is $2,642/month. This means that the maximum benefit in 2014 for a 62-year-old is $1,992/month and for a 70-year-old the maximum benefit in 2014 is $3,425/month. This may seem frustrating; however, there is a good reason for it. The Social Security Administration (SSA) has also set maximum contribution amounts every year since 1937. For example, in 1937, only $3,000 of your salary was taxed; in 1985, only $39,600 of your annual salary could be taxed; and in 2014 a maximum salary of $117,000 can be taxed for Social Security. The SSA increases the maximum salary that is taxable every year for inflation (the 2015 maximum is slightly higher at $118,500); however, this also increases the maximum benefit every year.
There are some cases where people are taxed over the salary limit for Social Security. If you have more than one job and your total annual salary is over the maximum, you will likely over pay. This is because all your employers will withhold Social Security tax regardless of what another employer is doing and what your total salary is. The good news is that when you file your annual tax return, you will receive a refund for this overpayment.
So just remember, regardless of how much money you make now, you will still have to consider a maximum Social Security benefit in the future.
C.J. Miles, MSA, MBAHCM
Research Analyst/Certified Social Security Advisor (NSSA)
AMAC Foundation
Notice: If you have any additional questions regarding contributions, benefits, or any other Social Security issues, you can reply below. If you would like to discuss your situation privately, you can email C.J. at cmiles@amacfoundation.com. Please do not provide any personal identification information such as Social Security numbers.
This posting is presented for informational purposes only and does not represent legal or financial guidance. Any opinions or interpretations presented are either those of the original author or, in the case of articles authored by the AMAC Foundation, are the opinions of AMAC Foundation staff, originally trained and accredited by the National Social Security Association (NSSA) and certified via the AMAC Foundation. Any links included in the article are valid on the posted date; socialsecurityreport.org cannot guarantee the duration of the links’ validity. NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (https://amacfoundation.org/services/) or email us at ssadvisor@amacfoundation.org. Because we are a non-profit organization, there is no charge for these services.