In 2021, the maximum Social Security benefit is $3,895 per month. This sounds like a fortune -- and compared to the average monthly benefit of $1,544, it does provide a generous amount of income.

But, the reality is, even if you're one of the lucky few to get $46,740 in Social Security benefits, this money isn't actually going to do much to help you have a secure retirement. Here's why the $3,895 Social Security benefit isn't necessarily all it's cracked up to be.

Two older adults with calculators and financial paperwork.

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Why retirees receiving a $3,895 Social Security benefit probably can't live on it

The maximum $3,895 Social Security benefit check is available only to a very small percentage of Americans who did two things:

  • Earned the maximum wage subject to Social Security taxes for a full 35 years
  • Claimed Social Security benefits at the age of 70

The maximum wage subject to Social Security tax is called the wage base limit, and it changes periodically. Anything above the wage base limit won't count in the formula that determines how much Social Security income a retiree receives. 

In 2021, the wage base limit is $142,800. In previous years, the limit was lower because it increases based on inflation. But, it was still at a very high level, with only around 6% of people each year earning enough to hit it. 

That means only the country's top earners actually get a $3,895 Social Security benefit. If you're earning at least $142,800 (or the inflation-adjusted equivalent of it upon retirement) and end up with a Social Security benefit of $46,740, your Social Security benefits are replacing -- at most -- 32.7% of pre-retirement wages. 

That's actually less than the 40% of pre-retirement earnings Social Security is designed to replace for most retirees. And there's a reason for that. The benefits program is progressive, with higher earners receiving average benefits equaling a smaller percentage of their career-average earnings. 

Most people simply cannot live on 32.7% of pre-retirement income -- even if they'd receive what the typical American considers to be a generous amount of retirement benefits. And remember, to get this maximum benefit, they'd have had to earn the equivalent of $142,800 for at least 35 years. After so much time, they're likely used to a standard of living that's far higher than $46,740 in income would support.

The bottom line is, no matter how high a Social Security benefit may seem on the surface, this entitlement program is not designed to be your sole source of support in retirement. In order to avoid a reduced quality of life, you'll need to make sure you have supplementary savings -- and that's true whether you get the minimum benefit or the maximum. 

So, don't assume that generous Social Security checks are going to be enough to fund your later years. Start saving now so you'll have a nest egg that supplements your retirement income if you hope to live a life free of financial worries as a senior.