According to the Social Security Administration (SSA), one of the primary purposes of Social Security is to provide for the material needs of aging individuals and their families.
Yet in 2022, the average monthly Social Security benefit was just $1,668, far below the maximum benefit of $4,194. I don't know about your "material needs," but for me, $1,668 is only a fraction of my basic monthly expenses.
So, how does one receive the maximum monthly benefit of $4,194, which goes a lot further in providing for one's needs? To answer that, you first need to understand how the SSA determines your monthly benefits.
How your payment is calculated
The SSA considers three factors when calculating your monthly benefit:
- The number of years you've worked.
- How much you've made in your career.
- When you claim your benefits.
Fairly simple, right? Now let's unpack what you'll need to do to receive $4,194 per month in benefits.
1. Meet the minimum number of working years
The SSA uses your 35 highest earning years to calculate your monthly payment. If you worked for less than 35 years, you can still receive benefits, but the SSA will assign $0 to each year you didn't work out of 35. Each 0 significantly reduces how much you'll receive in monthly benefits once you retire.
Thus, if you have aspirations of maximizing your monthly benefits, you'll need to work a minimum of 35 years.
2. Earn at least the taxable maximum
You're probably all too familiar with the taxes that come out of your paycheck each month to fund Social Security. What you might not know is there's a cap on how much you can be taxed for Social Security.
As of 2022, any income earned in excess of $147,000 for individuals is exempt from Social Security taxes.
This wage cap is also used when computing your monthly benefits once you claim them. In order to receive the maximum monthly benefit in retirement, you'll need to make at least $147,000 for all 35 years.
3. Wait to claim your benefits
Finally, the last thing you'll need to do to maximize your benefits is delay claiming them until you reach age 70.
If you managed to check the first two boxes above but don't want to wait until 70, here's how much you can expect to make by either claiming early or waiting until full retirement age (FRA):
62 (earliest you can claim SS)
67 (FRA) *
The maximum benefit is unrealistic but not unimportant
You might be reading this and thinking you'll never be able to maximize your monthly benefit. After all, the average yearly salary in the U.S. today is just $53,490.
According to the Economic Policy Institute, only about 10% of Americans earn more than the taxable maximum. And to do that for 35 years would place you in a much more exclusive class of earners.
The sober truth is most of us will not earn the maximum Social Security benefit in retirement. But understanding how one would accomplish that impressive feat can help you boost your benefits.
It can drive you to work harder to get that promotion or graduate degree so you can earn more, consequently increasing your future benefits. Or it might weigh heavily on your decision to continue working in your highest-earning years to replace the low-earning years early in your career.
The exercise of understanding how to achieve the maximum Social Security monthly check is more about learning the formula than it is about realistically achieving the $4,194.
Now that you know how the SSA computes your benefits, you can make the right career decisions to get the most out of your future Social Security income.