Did you know the average Social Security check in 2022 is just $1,657? That's less than half the absolute maximum benefit of $4,194 and just a fraction of the average American household expenses of $5,111.
While the average benefit is shockingly low, the maximum should not be the goal because the harsh reality is the vast majority of Americans entering retirement will not receive that amount.
Here's a look at why that is, as well as why understanding how your monthly benefit is calculated is so important for your retirement planning.
Image source: Getty Images.
Here's how much you need to make
If you aspire to one day receive the maximum Social Security benefit, you'll need to earn at least the Social Security Administration's contribution and benefit base, which is $147,000 in 2022.
The contribution and benefit base is the annual earnings an individual needs to make in order to qualify for the maximum benefit upon retirement.
On the surface, while $147,000 is a significant salary, it doesn't sound wildly unrealistic -- that is, until you learn you'll need to earn the contribution and benefit base for a minimum of 35 years in order to max out your monthly checks.
And the current base is likely to increase next year because the Social Security Administration adjusts the figure on an annual basis to account for inflation.
For context, here's how it's changed over the last decade.
|
Year |
Amount |
|---|---|
|
2012 |
$110,100 |
|
2013 |
$113,700 |
|
2014 |
$117,000 |
|
2015 |
$118,500 |
|
2016 |
$118,500 |
|
2017 |
$127,200 |
|
2018 |
$128,400 |
|
2019 |
$132,900 |
|
2020 |
$137,700 |
|
2021 |
$142,800 |
|
2022 |
$147,000 |
Data source: The Social Security Administration.
For those nearing retirement, here's a handy chart detailing the contribution and benefit base going all the way back to 1937.
Being a high earner alone isn't enough
Even if you manage to earn a high salary for 35 years, you'll also need to wait until age 70 in order to qualify for the maximum benefit of $4,194.
For most of us, the hoops to jump through are simply not realistic. And that's OK.
While the maximum benefit sounds enticing, it's much more prudent to focus on how you can boost your future benefits rather than aiming for a nearly unachievable goal.
Delaying claiming your benefits by a few years, especially if you're in your highest-earning years, can have huge implications on your monthly Social Security income.
If you're a long way from retirement, consider taking some courses to learn new skills in order to boost your earning potential. Not only will this allow you to save and invest more, but it will also increase your future Social Security benefits since your payments are calculated from your 35 highest-earning years.
Keep your eye on the ball
Learning what's needed to achieve the maximum Social Security benefit can be disheartening, but remember that very few Americans will receive that amount.
Your focus should be on what you can do to boost your benefits as much as possible.
Once you understand your future retirement income is tied to how much you earn, how long you work, and when you claim your Social Security benefits, you'll find clarity in your career decisions over the course of your working life.
