Why Some Retirees Receive More Than $62,000 a Year in Social Security Benefits

Detailed summary

Social Security hands some retirees an annual check that dwarfs what most workers expect, and the gap comes down to two factors almost anyone can understand. Knowing which one you can still control might change when you decide to stop working.

If you're thinking it's a bad idea to try to retire on Social Security alone, you'd be correct. The average monthly Social Security benefit today is only $2,086. On an annual basis, that's a $25,000 paycheck. That's unlikely to work for you unless your retirement expenses are unbelievably small.

But some Social Security recipients collect a lot more than $25,000 a year. Those who are eligible for the program's maximum monthly benefit this year can get a little more than $62,000.

If you're wondering why some Social Security recipients get such a large payday while others don't, it boils down to how the program calculates those monthly benefits.

Social Security benefits are based on two factors -- lifetime wages and your filing age. The Social Security Administration takes your 35 highest-paid years of earned wages into account when calculating your monthly benefits. Within that formula, wages earned earlier in your career are indexed for inflation.

You're entitled to your monthly benefit based on your wage history without a reduction at full retirement age (FRA), which is 67 for people who were born in 1960 or later. But if you file ahead of FRA, that benefit gets reduced. And if you delay your claim past FRA, that benefit gets an increase.

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On the flipside, for each year you delay Social Security past FRA, your benefits grow 8%. That incentive ends when you turn 70. But you could potentially give your Social Security checks a 24% boost if you don't file at 67 but, rather, wait three years instead.

People who are entitled to $62,000 a year in Social Security have a history of very high earnings.

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