A $4,194 monthly Social Security check could help you finance a pretty comfortable retirement, especially if you have personal savings too. But few people manage to pull this off. If you're up for the challenge, here are the three steps you need to take to lock in the maximum Social Security benefit.
Step one: Work at least 35 years
The Social Security Administration considers your income during your 35 highest-earning years, adjusted for inflation, when calculating your benefit. You can still qualify for Social Security if you haven't worked that long, but you'll receive smaller checks due to zero-income years being factored in. If you only work 30 years, for example, you'll have five zero-income years weighing your benefit down.
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Working longer than 35 years might increase your benefit. This isn't the case for everyone, but many people earn more later in their careers than they did when they first joined the workforce.
Once you've worked more than 35 years, the government will ignore some of those earlier, lower-earning years when calculating your benefit and include the newer, higher-earning years. That leads to larger benefit checks compared to what you'd get if you stopped working right at 35 years.
Step two: Earn the equivalent of $147,000 in 2022 dollars in each of those years
This step is the reason most people aren't able to earn the maximum $4,194 Social Security benefit. It requires a high income that's out of reach for most Americans. Even if you manage to earn six figures, you need to be able to pull it off for 35 years to claim the largest checks.
In future years, the bar you'll have to meet in order to claim the maximum benefit will be even higher. For 2022, $147,000 is the maximum income subject to Social Security tax. But this is expected to rise to about $155,100 for 2023. In years past, this figure was lower.
The bottom line is, you need to consistently pay the maximum Social Security tax if you want the largest Social Security benefit. Realistically, it's not going to happen for most people, but that's OK. You can still use this information to your advantage.
Anything you can do today to increase your income will also help your Social Security benefit. Things like negotiating a raise, securing a better-paying job with a different company, or working overtime are all fair game. You could also think about starting a side business if that's something that appeals to you.
Step three: Wait to sign up for benefits until 70
The government assigns everyone a full retirement age (FRA) based on their birth year, and it uses this information, along with a person's income, to determine the size of their Social Security checks. For today's workers, FRA is somewhere between 66 and 67.
You can claim as early as 62, but signing up before your FRA shrinks your checks. Those who sign up at 62 get 25% less per month if their FRA is 66 or 30% less if their FRA is 67.
Delaying benefits increases your checks a little at a time until you reach your maximum benefit at 70. Those who do this receive an extra 24% per month if their FRA is 67 or 32% if their FRA is 66. And that extra boost is key if you want the $4,194 monthly benefit.
But this doesn't mean delaying benefits is always your best move. If you have a terminal illness or you really need financial help, signing up early is wise. But those who think they'll make it into their 80s or beyond and can afford to delay, often end up with larger lifetime benefits by doing so.
It can be a little disappointing to know the maximum Social Security benefit is out of reach. But now that you know a little more about how the government calculates benefits, you can start to pursue your own maximum benefit. Think about when you'd like to claim Social Security and review this annually when you look over your retirement plan. Don't be afraid to make changes if your retirement plans change over time.
