Social Security retirement benefits play a significant role in many retirees' finances. In 2023, the highest monthly Social Security benefit possible is $4,555, but unfortunately for most people, they won't be seeing this amount when it's time to claim benefits.
Here's how you can find out if you're among the select few eligible to receive the full $4,555.
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How Social Security determines your monthly benefit
Your Social Security benefits are calculated by taking a percentage of your average income during the 35 years when your income was highest (adjusted for inflation). However, not all income is considered. Only income up to a certain wage base limit is taxed each year and counted in the calculation.
For example, the wage base limit in 2023 is $160,200, meaning you don't pay any Social Security tax on income above that amount. It also means any amount you earn above that won't be considered when calculating your monthly Social Security benefit.
To get the maximum $4,555 benefit, your average income must be the highest possible during those 35 years. This means that your income must be at or above the wage base limit for each of those years. If 2023 will be one of the 35 years included when calculating your Social Security benefit, you'll need to earn at least $160,200 to have a shot at receiving the maximum payout.
Each year the wage base limit is adjusted for inflation (it was $147,000 in 2022), so you'd essentially need to earn the inflation-adjusted equivalent of $160,200 for at least 35 years.
When you claim Social Security matters
Your Social Security benefit revolves around your full retirement age, which is the age you're eligible to receive your full monthly benefits. Below are full retirement ages based on birth years:
| Birth Year | Full Retirement Age |
|---|---|
| 1943 to 1954 | 66 |
| 1955 | 66 and 2 months |
| 1956 | 66 and 4 months |
| 1957 | 66 and 6 months |
| 1958 | 66 and 8 months |
| 1959 | 66 and 10 months |
| 1960 or after | 67 |
Data source: Social Security Administration.
Although your full retirement age is when you can receive your full benefit, you have the option to take benefits as early as age 62 or as late as 70. Taking benefits early will reduce them based on how far away you are from your full retirement age.
Delaying benefits past your full retirement age will increase your monthly benefit until you reach 70. In order to get the maximum $4,555 benefit, you'd need to delay benefits until age 70 as well as meet the income requirements.
The maximum benefit in 2023 for people receiving benefits at age 62 is $2,572, and $3,627 at full retirement age.
Finding out your monthly benefit
You should check your earnings record on the Social Security website to get an accurate idea of how much you may receive in Social Security benefits. Once you create an account, it will show your annual wages and estimated monthly Social Security benefits.
Chances are that this number is less than the $4,555 maximum, but that's to be expected. Only roughly 6% of people have income above the wage base limit each year, and the number of people who do that for 35 years is far, far less.
Ideally, you want to save and invest properly throughout your career so Social Security can be supplemental income and not your primary source.
