Earning the maximum Social Security benefit can leave you with a generous monthly income. In 2022, for example, the maximum monthly check, $4,194, will provide a whopping $50,328.
But the vast majority of Americans are earning far less than what it takes to get the maximum benefit from the Social Security Administration when they retire. In 2021, the typical worker's annual salary is projected to be $90,748 short of what's needed to get the largest Social Security checks.
Why Americans fall short of maxing out Social Security
To earn the maximum Social Security benefit, someone needs to do two things:
- Earn the maximum taxable income for at least 35 years. Social Security sets a maximum taxable income, called the wage base limit. This limit exists because benefits are based on average wages during your 35 highest-earning years. If all income were included in calculating this average, people with very high incomes would end up with huge benefit checks. Instead, only income up to this wage base limit counts, and you don't pay Social Security taxes on earnings above it.
- Claim benefits starting at age 70, despite becoming eligible at 62. Benefits can be maxed out only if you earn the maximum possible delayed retirement credits. This means waiting until 70.
It's this first requirement that so many people are falling short of meeting in 2021.
Most people will earn far less than the wage base limit in 2021
In 2021, the wage base limit is $142,800. If you earn that or more, you are subject to the maximum Social Security tax and receive credit for the maximum amount of wages possible.
But most people will fall far short of earning $142,800 this year. The Bureau of Labor Statistics reported the average annual salary was $52,052 as of the third quarter of 2021. That means the typical American will earn $90,748 less than the salary needed to hit the wage base limit.
Earning the maximum taxable wage during at least 35 years of your career is a prerequisite to getting the largest benefit. Falling short in any of the 35 years counted toward your benefits calculation means you won't have the highest possible average wage, and thus cannot get the highest possible benefit. With the typical American earning almost $100,000 less than this magic number, that helps to explain why the average retirement benefit in 2022 will be just $1,657, less than half the maximum.
You could still max out your future benefits, even if you make less than $142,800 this year. But for that to happen, you need to make sure 2021 won't count as one of the 35 years that determines your average wage. To do that, you need to work at least 36 total years, earning the maximum taxable income during the other 35. And the maximum taxable income goes up each year. In 2022, for example, you'll have to earn $147,000 to hit the target.
If you were one of the many who earned much less than $142,800 in 2021, don't count on getting the highest Social Security checks possible -- unless this was just a bad year and your income is usually much higher. You can use the mySocialSecurity.gov website to estimate your likely future benefit for a more realistic idea of what Social Security will actually pay you in retirement, allowing you to plan and save accordingly.