Social Security doesn't pay all beneficiaries the same amount. The sum they're entitled to hinges on factors like lifetime earnings and their filing age.
This year, the maximum monthly Social Security benefit is a rather impressive $4,555. That's over $54,000 a year in Social Security alone. And so you might want to do what you can to score a monthly payment that high.
Here's the problem, though: Most seniors do not come close to snagging the maximum Social Security benefit. And even if you're motivated to try, that number might be a fantasy based on the wages your career allows for.
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What it takes to score the maximum monthly benefit
To be entitled to the maximum from Social Security, you must:
- Delay your claim until age 70.
- Work at least 35 years.
- Earn the equivalent of the yearly wage cap or more each year.
The first two items are pretty easy to check off. If you're willing to work longer, you might manage to delay your Social Security filing until your 70th birthday, resulting in a nice boost. And even if you take a few career breaks, you might have ample opportunity to put in 35 years in the labor force.
That last bit, however, is trickier. Each year, there's a wage cap on Social Security. Earnings beyond the wage cap aren't taxed for the program's purposes, and they also don't count toward calculating retirement benefits.
This year, the wage cap is $160,200. And it tends to rise every year in line with wage growth and inflation.
You might be willing to work hard to get a promotion and dedicate your evenings and weekends to a side hustle. But unless you're in a high-paying field, you might not be in a position to earn $160,200 per year, or anywhere close.
And if your earnings don't at least hit the wage cap during your 35 most-profitable years in the labor force, you won't be able to collect the maximum once you're ready to sign up for Social Security.
Don't sweat a lower benefit
At this point, you might be coming to terms with the idea of collecting a lot less than $4,555 a month from Social Security. But that's really OK.
You don't need the maximum benefit to retire comfortably. You just need a total income that allows you to live the lifestyle you want. And if you work on building a nest egg, you might end up with more than enough money as a retiree to do the things you've always wanted to do.
Best of all, if you commit to funding a nest egg from a young age, you can grow a lot of wealth over time, even on an average salary. In fact, let's say that based on your wages, you can only afford to put $350 a month toward retirement savings. If you do so over 40 years, and your investments generate an average annual 8% return (a bit below the stock market's average), you'll end up with almost $1.1 million.
In that scenario, your primary source of retirement income is likely to be your personal savings, not Social Security. And so you're likely to be OK with a monthly benefit that isn't quite -- or nearly -- as high as $4,555.
