Holding out for the biggest possible Social Security benefit is a smart move for many people. In 2022, the maximum benefit is $4,194. That's a nice chunk of change for most retirees, considering it's guaranteed income.
But for the vast majority of us, our Social Security checks will come nowhere close to the maximum benefit. In January 2022, the average monthly check was $1,657 -- and that's after accounting for the 5.9% cost-of-living adjustment. Keep reading to learn why it's so hard to collect the maximum Social Security check.
What does it take to get $4,194/month from Social Security?
Let's take a look at what you have to do to score that $4,194 monthly check from Social Security:
- You have to work for at least 35 years. Your Social Security benefits are based on your 35 highest-earning years. If you work just 34 years, the 35th year's earnings would be entered as $0, and you wouldn't be eligible for the maximum benefit.
- You have to be a high earner for at least 35 years. Working for 35 years may not sound so difficult. But to get that maximum benefit, your earnings would need to be the equivalent of Social Security's maximum taxable income for at least 35 years. In 2022, the maximum taxable income is $147,000, and this amount rises every year. Only about 6% of workers earn this much in any given year.
- You have to wait until age 70. Finally, to get the biggest Social Security check, you have to wait until you're 70 to take full advantage of delayed retirement credits. If you worked for 35 years and earned the maximum taxable income for all 35 years, you'd get just $2,364 a month if you retired at 62. If you waited until your full retirement age, you'd receive just $4,194 a month.
Of course, if you've earned enough for 35 years to collect the maximum amount from Social Security, $4,194 a month probably won't be enough for your retirement. Financial planners typically recommend replacing about 80% of your income when you retire, though higher earners can often get away with replacing less income to maintain their standard of living.
But Social Security replaces a smaller share of income for people who earned a substantial salary. According to Fidelity research, Social Security would replace about 35% of income for someone with a $50,000 salary. But for someone who earned $200,000, benefits would replace just 16% of income.
How will your Social Security stack up?
If you're not sure how much to expect from Social Security, you can create a my Social Security account to estimate your future benefits. You can see your projected benefit if you retire at 62, 67, or 70. But don't be surprised if your estimated benefits fall short of the max.
Most people will never earn enough to max out their Social Security. Many retirees also don't have the luxury of holding off on collecting benefits until they're 70. Even those who are able to delay as long as possible may find that doing so isn't worth it for a host of reasons.
The less dependent you are on Social Security, the better off you'll be in retirement. That's why it's essential to start investing as early as possible in a workplace retirement account, like a 401(k), an individual retirement account (IRA), or a combination. Those who are 50 and older can take advantage of catch-up contributions.
Getting $4,194 monthly Social Security checks isn't happening for most people. But you have plenty of alternatives to build a healthy and wealthy retirement.