For millions of older adults, Social Security can make or break retirement. In fact, around one in four workers say their benefits will be their primary source of retirement income, according to a 2022 report from the Transamerica Center for Retirement Studies.
However, the average benefit amount among retirees is only around $1,800 per month, as of July 2023. As retirement costs continue to rise, it's becoming more and more difficult to rely on Social Security -- especially as a primary source of income.
There are steps you can take, though, to boost your monthly payments. In 2023, the maximum amount you can collect from Social Security is $4,555 per month. While this is a lofty goal and not easy to achieve, here's exactly what it takes to reach it.
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How your benefit amount is calculated
There are three major factors affecting your future benefit amount: the length of your career, the age you begin claiming, and your lifetime earnings.
The Social Security Administration takes an average of your earnings over the 35 highest-earning years of your career, then runs it through a complex formula to account for changes in wages during that time. The result is the amount you'll receive if you file at your full retirement age (FRA).
If you've worked fewer than 35 full years, you'll have zeros added to your average to account for the time you weren't working -- which will bring down your earnings average and reduce your benefit amount.
Similarly, if you file for benefits before your FRA -- which is age 67 for anyone born in 1960 or later -- your payments will be permanently reduced by up to 30%. To earn the maximum possible benefit, though, you'll need to wait until age 70 to begin claiming.
The salary you need for the max payments
Finally, your income throughout your career will have a significant impact on your monthly benefit.
The higher your income, the larger your payments will be -- up to a certain point. The maximum taxable earnings limit is the highest income subject to Social Security taxes. To earn the max $4,555 monthly payments, you'll need to consistently reach this limit throughout your career.
The maximum taxable earnings limit changes from year to year to account for inflation, but as of 2023, it's $160,200 per year. For context, 35 years ago in 1988, the earnings limit was $45,000 per year.
What if you're off track?
The reality is that most people won't be able to achieve the maximum benefit amount, and that's OK. Even if you're off track, there are still ways to increase your monthly payments.
To boost your benefit amount, simply try your best to get closer to each of the three benchmarks for the max payments: work for 35 years, delay benefits until age 70, and reach the $160,200 per year earnings limit.
If your income is nowhere near the earnings limit, for example, but you can wait until age 70 to file for benefits, that can still increase your benefits by hundreds of dollars per month. Or if you can't delay Social Security but you can work a full 35 years before filing, that will also boost your payments.
Maybe you can't achieve any of those three benchmarks, but you can delay benefits by just one year or slightly increase your income. That will still result in larger checks each month.
Reaching the $4,555 maximum benefit is incredibly difficult, but that doesn't mean you can't increase your monthly payments. Small steps can go a long way, and with the right strategy, you can earn more than you might think from Social Security.
