In 2022, the maximum monthly Social Security check comes in at $4,194.
Receiving such a hefty benefit may seem like it would be an ideal way to support yourself in retirement, and you may be wondering whether you're on track to get such a large payment.
The reality, however, is that most Americans will get far less. And even if you are likely to get a big Social Security check, this doesn't matter much for your retirement planning. Here's why.
Getting a $4,194 Social Security check doesn't change anything about your retirement planning needs
So, why doesn't it matter whether you're on track to get a $4,194 Social Security check? There's a simple reason.
Social Security is always designed to replace just a small percentage of pre-retirement income. And, because the benefits formula is progressive, it actually provides higher earners less money relative to what they were earning before leaving the workforce even though the dollar amount of their monthly payments is higher.
While benefits generally replace around 40% of pre-retirement earnings for the typical retiree, higher earners get back a smaller percentage of pre-retirement earnings. So while the wealthiest Americans may receive a $4,194 check, their "big payment" will provide far less annual income than they're used to.
Since most people base their lifestyle around how much they make, someone who is on track to get a $4,194 Social Security benefit isn't going to be able to live comfortably on it anymore than a person who gets a $1,200 check. Both parties need supplementary savings to bring their replacement rate up to the 80% or more of pre-retirement income most experts recommend.
In fact, while the typical retiree may need to aim for a nest egg that will replace around 40% of what they were earning before they quit their job, those high earners on schedule for the maximum Social Security payment may need to grow their account balance big enough to replace around 50% or more.
Should you try to max out your Social Security benefits?
The bottom line is, you shouldn't really care if your Social Security checks will hit the maximum $4,194 per month (or whatever the max benefit is in the year you retire). Instead, focus on saving enough money to replace about 40% to 50% of your income so you don't rely on Social Security alone.
This doesn't mean you don't want to take some steps to raise your retirement benefit checks if you can. Increasing your payments from Social Security is possible if you increase your lifetime earnings, and boosting your wages is always a good goal. Delaying the start of your benefits can also lead to more monthly income, and that can pay off for you since Social Security is protected against inflation and guaranteed to last until you die.
The important thing, though, is to look realistically at the role these benefits will play in supporting you and to make a comprehensive plan to have multiple income streams that provide plenty to live on once your paychecks come to an end.