You may have heard that Social Security is running out of money, and the good news is that that's simply not true. Because the program is primarily funded by payroll tax revenue, as long as we have an active labor force, Social Security will have money coming in. However, Social Security is facing a funding shortfall in the coming years that might force it to cut benefits once its trust funds run out of money.
Some lawmakers have suggested raising the wage cap at which earnings are taxed for Social Security purposes to address the problem. But if that were to happen, the program would most likely need to raise its maximum monthly benefit to keep things fair to higher earners who'd be paying into the system more.
But since that change hasn't happened yet, the maximum monthly Social Security benefit one can collect today is $4,555. Of course, that's not a small amount of money. But it's also a benefit that doesn't apply to the average Social Security recipient.
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What it takes to score a monthly $4,555 Social Security benefit
To be eligible for the maximum monthly Social Security benefit, whether it's $4,555 or another amount (keeping in mind that this figure is likely to rise over time), you have to do three things:
- Work at least 35 years
- Earn the equivalent of the annual wage cap (or more) for 35 years
- Delay your Social Security filing until age 70
The first point is pretty self-explanatory. Social Security bases your monthly benefit on your 35 highest-paid years in the labor force. So if you end up working 42 years during your career, only 35 of those years will count in the context of calculating your monthly benefit.
On the flip side, if you don't work at least 35 years, you'll have $0 factored into your benefit calculation for each year you're missing income. Even one $0 year will make it impossible for you to snag the maximum monthly benefit.
The second point needs a bit more of a deep dive. Each year, a wage cap is set that determines how much income is subject to Social Security taxes. This year, it's $160,200, and that figure is likely to rise over time due to inflation and wage growth. That figure may even be lifted substantially to help prevent Social Security cuts, as mentioned.
Either way, to snag the maximum monthly Social Security benefit, your earnings have to equal the wage cap or exceed it for 35 years. So if this year, your salary is $165,000, you've met that requirement for 2023. Whether you can meet it for 35 years, though, is a different story.
Finally, to score the maximum monthly Social Security benefit, you must delay your claim past full retirement age, all the way to age 70. Beyond 70, your monthly benefit can't grow as a result of a delayed filing, so it's generally considered the latest age to sign up for Social Security, even though you can technically delay your claim as long as you want to.
You're probably not getting the maximum monthly Social Security benefit
Most Social Security recipients today do not get $4,555 -- not even close. And unless you're a really high earner, you might get a smaller benefit, too.
But that's not something to stress about. The reality is that if you save well for retirement and have income streams outside of Social Security, you can do quite well with a lower monthly benefit. And if you can delay your filing past full retirement age and wait until age 70 to sign up for Social Security, you'll boost your monthly benefit nicely, thereby locking in a higher payday for the rest of your life.
