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Each year when the Social Security Administration announces the Cost Of Living Adjustment to benefits for the coming year, with similar ballyhoo they announce the maximum benefit amount available for the coming year. For 2013, the maximum Social Security benefit for someone reaching Full Retirement Age (FRA) in that year will be $2,533, an increase of $20 over 2012.
In the wake of these announcements a couple of weeks ago, a reader (thanks, DS!) sent me a question:
Why is it that the maximum Social Security benefit only increased from $2,513 to $2,533? This is only an increase of 0.8%, while the COLA increase indicated that benefits would climb by 1.7%?
This is a drawn out and complicated situation to explain, but I think it’s important to fully understand. First, you have to realize that when the Social Security folks publish this maximum amount, they are talking specifically about someone who reaches Full Retirement Age in the year being reviewed. For 2012, that would be someone born in 1946; for 2013, the person was born in 1947. As such, the calculations are based on different maximum wage bases.
The way that the maximum benefit for a particular year is calculated is based upon the maximum wage base for the year, as well as the applicable COLAs that would apply after the PIA (Primary Insurance Amount) has been calculated for that individual.
Maximum Benefit Calculation for 2012
For calculating the maximum benefit amount for 2012, we’re looking at an individual who was born in 1946, turning age 66 in the year 2012. The table below indicates the maximum wage bases for each year from his age 22 in 1968, through 2011, because his maximum benefit was determined last year. The third column indicates what the wage base equates to in terms of indexed income – this is based on the Average Wage Index (AWI) Series.
| Year | Max Wage Base | Indexed Wage Base |
| 1968 | $ 7,800 | $ 54,109 |
| 1969 | $ 7,800 | $ 51,152 |
| 1970 | $ 7,800 | $ 48,734 |
| 1971 | $ 7,800 | $ 46,402 |
| 1972 | $ 9,000 | $ 48,763 |
| 1973 | $ 10,800 | $ 55,069 |
| 1974 | $ 13,200 | $ 63,530 |
| 1975 | $ 14,100 | $ 63,143 |
| 1976 | $ 15,300 | $ 64,095 |
| 1977 | $ 16,500 | $ 65,213 |
| 1978 | $ 17,700 | $ 64,809 |
| 1979 | $ 22,900 | $ 77,104 |
| 1980 | $ 25,900 | $ 80,000 |
| 1981 | $ 29,700 | $ 83,347 |
| 1982 | $ 32,400 | $ 86,181 |
| 1983 | $ 35,700 | $ 90,546 |
| 1984 | $ 37,800 | $ 90,550 |
| 1985 | $ 39,600 | $ 90,985 |
| 1986 | $ 42,000 | $ 93,719 |
| 1987 | $ 43,800 | $ 91,875 |
| 1988 | $ 45,000 | $ 89,960 |
| 1989 | $ 48,000 | $ 92,304 |
| 1990 | $ 51,300 | $ 94,295 |
| 1991 | $ 53,400 | $ 94,630 |
| 1992 | $ 55,500 | $ 93,529 |
| 1993 | $ 57,600 | $ 96,244 |
| 1994 | $ 60,600 | $ 98,608 |
| 1995 | $ 61,200 | $ 95,747 |
| 1996 | $ 62,700 | $ 93,517 |
| 1997 | $ 65,400 | $ 92,168 |
| 1998 | $ 68,400 | $ 91,601 |
| 1999 | $ 72,600 | $ 92,093 |
| 2000 | $ 76,200 | $ 91,592 |
| 2001 | $ 80,400 | $ 94,390 |
| 2002 | $ 84,900 | $ 98,688 |
| 2003 | $ 87,000 | $ 98,710 |
| 2004 | $ 87,900 | $ 95,301 |
| 2005 | $ 90,000 | $ 94,140 |
| 2006 | $ 94,200 | $ 94,200 |
| 2007 | $ 97,500 | $ 97,500 |
| 2008 | $ 102,000 | $ 102,000 |
| 2009 | $ 106,800 | $ 106,800 |
| 2010 | $ 106,800 | $ 106,800 |
| 2011 | $ 106,800 | $ 106,800 |
Maximum Benefit for 2013
| Year | Max Wage Base | Indexed Wage Base |
| 1969 | $ 7,800 | $ 53,474 |
| 1970 | $ 7,800 | $ 50,946 |
| 1971 | $ 7,800 | $ 48,508 |
| 1972 | $ 9,000 | $ 50,975 |
| 1973 | $ 10,800 | $ 57,568 |
| 1974 | $ 13,200 | $ 66,413 |
| 1975 | $ 14,100 | $ 66,009 |
| 1976 | $ 15,300 | $ 67,003 |
| 1977 | $ 16,500 | $ 68,173 |
| 1978 | $ 17,700 | $ 67,750 |
| 1979 | $ 22,900 | $ 80,603 |
| 1980 | $ 25,900 | $ 83,631 |
| 1981 | $ 29,700 | $ 87,131 |
| 1982 | $ 32,400 | $ 90,091 |
| 1983 | $ 35,700 | $ 94,655 |
| 1984 | $ 37,800 | $ 94,659 |
| 1985 | $ 39,600 | $ 95,115 |
| 1986 | $ 42,000 | $ 97,969 |
| 1987 | $ 43,800 | $ 96,045 |
| 1988 | $ 45,000 | $ 94,046 |
| 1989 | $ 48,000 | $ 96,494 |
| 1990 | $ 51,300 | $ 98,573 |
| 1991 | $ 53,400 | $ 98,924 |
| 1992 | $ 55,500 | $ 97,774 |
| 1993 | $ 57,600 | $ 100,610 |
| 1994 | $ 60,600 | $ 103,081 |
| 1995 | $ 61,200 | $ 100,093 |
| 1996 | $ 62,700 | $ 97,762 |
| 1997 | $ 65,400 | $ 96,354 |
| 1998 | $ 68,400 | $ 95,760 |
| 1999 | $ 72,600 | $ 96,275 |
| 2000 | $ 76,200 | $ 95,753 |
| 2001 | $ 80,400 | $ 98,675 |
| 2002 | $ 84,900 | $ 103,162 |
| 2003 | $ 87,000 | $ 103,191 |
| 2004 | $ 87,900 | $ 99,626 |
| 2005 | $ 90,000 | $ 98,406 |
| 2006 | $ 94,200 | $ 98,477 |
| 2007 | $ 97,500 | $ 97,500 |
| 2008 | $ 102,000 | $ 102,000 |
| 2009 | $ 106,800 | $ 106,800 |
| 2010 | $ 106,800 | $ 106,800 |
| 2011 | $ 106,800 | $ 106,800 |
| 2012 | $ 110,100 | $ 110,100 |
What does this mean?
Sterling Raskie, MSFS, CFP®, ChFC®
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And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.