How Do You Calculate the Maximum Social Security Retirement Replacement?


Quick Answer

The Social Security Administration calculates maximum retirement replacement benefits using a retiree's lifetime earnings and the national average wage index, as the SSA reports. In 2015, someone retiring at age 65 after receiving the maximum Social Security taxable earnings since age 22 would receive monthly benefits of $2,452.

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Full Answer

The SSA uses an index to bring past retiree wages to current equivalents to evaluate the appropriate monthly benefit, as the SSA claims. It does not use all working years in the calculation. The SSA computes an average wage based on the highest-paid 35 years of work. Based on the total monthly income retirees received on average while working, the SSA applies a formula that offers different benefits based on income size. Retirees making the maximum taxable income during their working years receive a percentage of their income, not to exceed the maximum monthly benefit for the year.

As the SSA reports, the maximum monthly benefit available to someone retiring at age 65 is $2,452 in 2015. Even if a retiree made more money than the maximum income taxed by Social Security, benefits may never exceed the maximum. This amount fluctuates from year to year, as the Motley Fool claims. Waiting to receive Medicare at age 70 instead of age 62 or 65 results in the highest benefit, as the Motley Fool states.

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