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Thinking of Claiming Social Security? Be Prepared for Less Than The $4,194 Maximum

By Christy Bieber – Dec 6, 2021 at 3:19AM

Key Points

  • Social Security's maximum benefit will be $4,194 in 2022.
  • Chances are good you won't get benefits anywhere near the maximum.
  • Retirees need a realistic idea of what Social Security will do for them.

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Very few people come close to earning the maximum benefit.

In 2022, the maximum Social Security benefit will be $4,194. If you're planning on claiming Social Security next year, chances are good you won't get anywhere near that much money -- and you need to be prepared for that before you start your checks.

It's helpful to understand why your benefit will fall far short of the maximum in most situations, as gaining insight into this issue can give you a more realistic picture of what income your own checks will actually provide.

Here's what you should know.

Older adult talking on phone in office.

Image source: Getty Images.

Why you'll probably get much less than the maximum benefit

For most people, benefits will fall far short of the maximum because their wages over their career will fall far short of the maximum taxable wage. 

See, Social Security benefits are determined based on a recipient's average wages during their 35 highest earning years (after their wages during their career are adjusted for inflation). But only wages up to the wage base limit count in determining each person's average wage. 

In order to get the maximum average wage, and thus the maximum benefit, you would need to earn at least the wage base limit each year. In 2022, the wage base limit is $147,000. That's much more than most people earn. And you'd have to earn the inflation-adjusted equivalent of that amount for a full 35 years, which even fewer people do -- even if some people hit the limit during a few years of their career. 

For each year you fall short of earning the wage base limit, your benefits fall below the maximum. And the bigger the gap between your earnings and this limit, the further away from the maximum benefit your Social Security benefits will be. 

Even those who do earn the wage base limit for 35 years have one more hurdle to cross to get the maximum benefit. They need to wait until 70 to claim their checks. That's because delayed retirement credits can be earned until that age, which raise the amount of your monthly check. Someone who has maxed out their wages every year for 35 years would end up with less than the max benefit if they didn't also earn the full amount of delayed retirement credits available.

Since chances are good that you won't come close to earning the maximum wage for 35 years and likely claim benefits before 70, your benefits are likely to be much lower than the $4,194 max benefit retirees could get in 2022. 

What can you do to have a comfortable retirement anyway? 

Since you probably aren't going to get the maximum Social Security benefit, you'll need to be realistic about what Social Security can do for you. Understanding how much your benefits will likely be can help you decide how much supplementary savings you need to produce enough income to support you.

For most people, it's important to replace at least 80% of pre-retirement income, while Social Security is designed to replace around 40%. If you assume you'll need to replace about 40% of your salary upon retirement, you can work backwards from there to estimate how large your retirement nest egg must be.

If you anticipate withdrawing around 4% of your retirement savings in year one and then adjusting upwards by inflation, you'll be able to determine your nest egg size by multiplying the amount of income your account must produce by 25. For example, if 40% of your pre-retirement income would be $24,000, you'd need $600,000 in savings for your investments to produce enough money to supplement Social Security. 

The sooner you realize your retirement benefits will likely fall far short of the maximum benefit, the sooner you can set retirement savings goals and begin investing what you need for the future -- so get started today. 

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