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How Will Your Social Security Stack Up to the $3,895 Max?

By Catherine Brock – Aug 23, 2021 at 7:10AM

Key Points

  • Social Security's maximum taxable income in 2021 is $142,800.
  • Wait until age 70 to claim your Social Security and your benefit increases by up to 32%.
  • On average, Social Security replaces about 40% of working income if you claim at full retirement age.

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Learn how to estimate your benefit and push it higher toward the monthly maximum.

The maximum Social Security benefit you can receive in 2021 is $3,895 monthly. That's a nice payout for passive income, but it's only available to a small percentage of retirees. Here's a look at how to estimate where your Social Security benefit will land and how you can get closer to that $3,895 max.

How to check your benefit

The fastest way to estimate your Social Security income is to create an account at my Social Security. Once you verify your identity, you can log in and access several tools to help you manage -- and maximize -- your benefit.

You'll see three benefit estimates in your account: age 62, full retirement age (FRA), and age 70. You'll also see that the later you claim, the higher your monthly benefit is. This is because the benefit formula is designed to give you the same total lifetime benefit, regardless of when you claim.

Adult on couch at home using tablet, sitting next to dog.

Image source: Getty Images.

Start receiving benefits at age 62 and you get a longer stream of smaller payments. Or wait until later and you get a shorter stream of larger payments. That's the idea, though it may not work out exactly that way if your lifespan turns out to be much longer or much shorter than the average.

If your benefit estimates look meager, don't panic (yet). You can't put too much stock in these numbers until after you verify two pieces of information. First, there is your earnings history -- missing or inaccurate earnings can make your benefit lower than it's supposed to be.

Second, consider your average future annual salary. Your benefit is calculated from your average earnings in your highest-paid 35 years of working. Depending on where you are in your career, those highest paid years may not have happened yet. The estimator doesn't account for this very well. It will use the income you reported in the prior year as your average future annual salary. That assumption could be way off, particularly if you're young. Fortunately, you can input a new future annual salary, and your benefit estimates will update accordingly.

If you don't want to log in, you can roughly estimate your benefit at 40% of your salary. This number is only a ballpark and assumes you'll take benefits at your FRA. Note that your benefit could be up to 30% lower if you claim at 62 or up to 32% higher if you claim at 70.

Why your benefit is lower than the max

Chances are your estimated benefit is lower than the maximum. Two factors should help explain the shortfall: your income history and claiming age.

To get the maximum benefit, you must have earned Social Security's maximum taxable income for 35 years or more. That income threshold changes from year to year, but it's $142,800 in 2021. And only those who delay their Social Security application until age 70 will receive the maximum benefit. If you meet the maximum income hurdle but start receiving benefits at an earlier point like FRA, your monthly Social Security income in 2021 would be $3,148 -- or $747 lower than the maximum. Claim at 62 with maximum income and the 2021 benefit drops to $2,324.

How to increase your Social Security benefit

Your earned income and your claiming age are two levers you can pull to raise your Social Security benefit. Regarding earned income, it doesn't matter how you increase it as long as the increase flows through to your tax return. You could get a raise, but a second job or side hustle would also work.

Another review of your earnings history can help you here. Look back at the 35 years in which you made the most money. To push your average income and benefit higher, you'll need to replace the lowest values on that list with higher ones. Said another way, if your top 35 years of income includes the year you worked part-time at the amusement park, working another year at your current full-time salary will make a difference.

As for claiming age, delaying your Social Security application can increase your benefit substantially. Just recognize the trade-off before you commit to that strategy. To hold out for a higher benefit, you must forgo retirement income upfront. That doesn't always make sense. If you or a loved one is in poor health, the higher income may be less important than your quality of life in your 60s.

Maxing out your potential

Most people don't have a shot at earning the maximum Social Security benefit. But you can max out your Social Security potential. Even if retirement is within a few years, you still have time to plump up your average earnings. A profitable side hustle could accomplish that. As a bonus, if your side business takes off, it'll reduce your reliance on squeezing every penny out of Social Security going forward.

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