It's never too early to begin thinking about your Social Security benefits. Even if you can't claim it for decades, the choices you're making right now will ultimately dictate how much you receive from the program. For those already of claiming age, the highest possible benefit is $3,895 per month in 2021. This will rise to $4,194 per month in 2022.
Only a lucky few ever reach the maximum benefit, but if you're interested in being one of them, here are three things you have to do.
1. Work for at least 35 years
Your Social Security benefit is based on your average indexed monthly earnings (AIME), or your average income over your 35 highest-earning years adjusted for inflation. You can still get money from the program if you haven't worked for 35 years, but you'll have zero-income years factored into your benefit calculation.
If you earned $50,000 per year, adjusted for inflation, every year for 35 years, your AIME would be about $4,167. But if you only worked for 34 years, your AIME would drop to about $4,048. That's because the 35th year in your benefit calculation would be a zero-income year. A few dollars' difference may not seem that significant, but it translates to smaller Social Security checks for the rest of your life.
Whenever possible, try to remain in the workforce for at least 35 years. Working more years isn't necessary, but it can help boost your benefits further. Most people earn more later in their careers than they did starting out. Those who work more than 35 years see these earlier, lower-earning years gradually replaced by their more recent, higher-earning years. The result is a larger AIME and a larger Social Security check.
2. Hit the annual wage cap
The average worker pays Social Security taxes on all the money they earn during the year, but this isn't always the case for high earners. The government sets a cap on the maximum income you pay taxes on in a given year. In 2021, you only pay taxes on the first $142,800 you earn. This limit rises to $147,000 in 2022. Earning more than this won't help your benefits because you aren't paying Social Security taxes on the excess.
If your goal is to qualify for the maximum Social Security benefit, you have to hit the earnings cap in each of the 35 years that factor into your AIME. That's no easy feat, and only those with very high incomes will typically accomplish it.
3. Delay benefits until 70
The final thing you have to do to qualify for the maximum Social Security benefit is to delay your benefits until 70. You can technically sign up as early as 62, but you have to wait until your full retirement age (FRA) to get the amount you're entitled to based on your work history. Your FRA is somewhere between 66 and 67, based on your birth year.
Signing up before your FRA shrinks your checks, while delaying benefits past your FRA increases them until you reach the maximum benefit at 70. This means it's important to strategically choose when you sign up based on how long you expect to live so you can get the most money overall.
Those who sign up right away at 62 only get 70% of their full benefit per check if their FRA is 67 or 75% if their FRA is 66. But this might be the better play if they don't expect to live a long life. Those who think they'll make it to their 80s or longer are usually better off by delaying benefits. They'll get 124% of their full benefit per check at 70 if their FRA is 67 or 132% per check if their FRA is 66.
In order to get the maximum $3,895 monthly benefit, you must delay benefits until 70. This isn't always easy. Some seniors need to start Social Security earlier to help them cover their expenses, while others may not live long enough to make this delay feasible.
The truth is, most people probably aren't going to reach the maximum Social Security benefit. But that's OK. You can still use the tips above to get as much out of the program as you possibly can. Make sure you work long enough, try to boost your income however you can, and be strategic about when you sign up for benefits so you can get your largest check possible.