It's a common misconception that Social Security is all you need to retire comfortably. For most people, those benefits won't translate to all that much buying power, especially these days, what with living costs soaring due to inflation.
But while you may not manage to live comfortably on the average monthly Social Security benefit, if you're in line for the maximum monthly benefit, it's a different story. In fact, today's maximum benefit is actually quite generous.
The most you can collect from Social Security on a monthly basis is $4,194. To be clear, most seniors receive a much lower benefit. But if you're eager to snag that maximum benefit, here's what you'll need to do.
1. Work at least 35 years
Your monthly Social Security benefit will hinge on how much you earn during your 35 most profitable years in the workforce. But if you don't work for at least 35 years, you can forget about collecting that maximum benefit. That's because you'll have a $0 factored into your personal benefits equation for each year you don't have any income on file.
2. Maximize your earnings
Each year, there's a wage cap put into place for Social Security, and earnings beyond that threshold don't count for the purpose of calculating benefits. They're also not taxed -- so that keeps things fair.
For context, this year, the w
age cap is $147,000, and so the maximum income you can earn this year to count toward your future benefit is -- you guessed it -- $147,000. If you want to set yourself up for the maximum Social Security benefit, your earnings will need to meet or exceed the wage cap every year during your 35 highest-paid years in the labor force.
3. Sign up for benefits at age 70
Once you reach full retirement age, or FRA, you're entitled to your full monthly benefit based on your wage history. FRA is either 66, 67, or somewhere in between, depending on when you were born.
If you want to claim the maximum Social Security benefit, then waiting until FRA to file won't do the trick. Instead, you'll need to delay your filing until age 70. Doing so will give your benefit a generous boost, since you get an 8% increase for each year you hold off on claiming Social Security beyond FRA (up to age 70).
What if you can't claim the maximum Social Security benefit?
While you can do your best to delay retirement and file for Social Security at age 70, you may not manage to work 35 years, or to earn a high enough income for 35 years that your earnings meet or exceed the wage cap. But if that's the case, don't sweat it.
Most seniors don't manage to collect $4,194 a month from Social Security, so if you think you'll end up with a lower benefit, you can compensate by making an effort to build a solid nest egg. If you retire with $1 million or more in your IRA or 401(k), that should make for a comfortable retirement -- regardless of what Social Security ends up paying you.
And if you think a $1 million nest egg is out of the question, think again. You can get there by contributing $500 a month to a retirement plan over 35 years and enjoying an average annual 8% return during that time, which is a few percentage points below the stock market's average. Once you reach that point, your Social Security benefit may not end up mattering to you all that much.