Earning the maximum Social Security benefit is no easy feat; you not only need to earn quite a bit over the course of your career, you have to do it consistently. On top of that, you need to wait until age 70 to earn more deferred retirement credits and ultimately maximize your monthly check.
Let's review the three levers you need to pull to receive the highest monthly check in retirement.
1. Work for at least 35 years
Social Security calculations consider your highest 35 years of earnings; if you didn't work for that period of time, years of zero income will be averaged into your benefit calculation. Fortunately, if you took time off in the earlier stages of your career, you have the opportunity in your 50s and early 60s to replace those zero-income years and ultimately increase your Social Security payout.
Those who earn the highest monthly payout in retirement are those who have paid the most into the system in Social Security taxes over an exceptionally long period of time.
2. Earn the maximum taxable wage base
To achieve the highest primary insurance amount (PIA) in retirement, you also need to reach the Social Security maximum taxable wage base in your 35 highest-earning years. At the inception of Social Security, nearly a century ago, the maximum wage base was a mere $3,000. In 2022, the maximum wage base is $147,000, and it's slated to increase by a sizable 8.9% to $160,200 in 2023.
The maximum wage base is the earnings level at which Social Security taxation stops. For employees, all earnings at or below the maximum taxable wage base are taxed at 6.2%, and the earnings go toward determining your future retirement benefit amount. To lock in the highest monthly payout in retirement, you'll need to have earned the maximum wage base in all of your highest 35 years of earning.
No easy task considering only 6% of the workforce hits the maximum in any given year.
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3. Wait until age 70 to claim benefits
Waiting until age 70 to take Social Security comes with a few key advantages. First, you have a longer runway to accumulate higher-earning years if you plan to work into your 60s. Next, you can earn up to 124% of your PIA simply by waiting three years beyond full retirement age (FRA) to claim benefits. Lastly, by waiting until age 70 to lock in benefits, you'll establish a higher inflation-adjusted spending floor that can help cover living expenses for the rest of your life.
This isn't always as simple as it sounds, since people face a variety of different challenges as they enter their 60s, and it mght not be possible to delay Social Security that long. But if you're physically and mentally able to continue working, and have the personal savings to cover expense gaps, waiting until 70 can really pay off in the long run.
Only a small share of workers manage it
The reality is clear: Only a small, diminishing percentage of workers actually receive the maximum Social Security benefit in retirement. This comes at the intersection of having worked at least 35 years in a high-paying career, and having delayed formal retirement until 70. Taking home $4,194 a month in benefits happens only if you're motivated, healthy, and know exactly how to play the game.
With that said, there's no shame in taking home less than the maximum. as long as you also work on building your personal savings along the way. If a $4,194 monthly payout is out of reach, you can still work to improve your payout by working longer, earning more, or waiting even one additional year to file for benefits.
