Social Security can make or break retirement for many older adults, especially those whose savings are falling short. But the average retiree only collects around $1,800 per month, as of July 2023, which amounts to roughly $22,000 per year.
With the right strategy, you can increase your benefit amount and earn far more than average. In 2023, the maximum you can receive from Social Security is $4,555 per month. Here's exactly what you need to do to achieve this target.
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1. Work for at least 35 years
The Social Security Administration uses your 35 highest-earning years to calculate your benefit amount. Those wages are averaged and then run through a formula to account for cost-of-living changes over the years, and the result is your full benefit amount.
If you haven't worked for at least 35 years, you'll have zeros added to your equation. That will bring down your earnings average and result in a smaller benefit.
2. Delay claiming until age 70
Your benefit based on your earnings is the amount you'll receive if you file at your full retirement age (FRA). This age will depend on your birth year, but it's 67 years old for anyone born in 1960 or later.
You don't have to wait until your FRA to file. In fact, you can begin claiming as early as age 62. But for every month you file before your FRA, your benefits will be reduced. If you have an FRA of 67 and you claim at 62, you'll face a permanent reduction of 30% per month.
To earn as much as possible from Social Security, you'll need to wait until age 70 to file. By delaying benefits past your FRA, you'll receive your full benefit amount plus a bonus of at least 24% per month.
The age you begin claiming is one of the biggest factors in determining your benefit amount. Even if you meet all the other requirements for the max payments, if you file at age 67, you'd only receive $3,808 per month. Claim at 62, and that number drops to $2,572 per month.
3. Reach the wage cap
Only income up to a certain limit is subject to Social Security taxes. Once you surpass that limit, any additional income will not result in a larger benefit amount.
This wage cap shifts from year to year to account for inflation, but in 2023, it's $160,200 per year. For context, 35 years ago in 1988, the limit was $45,000 per year.
To reach the maximum benefit amount, you'll need to have been consistently reaching these income limits throughout your career.
What if you're not on track?
The reality is that most workers will be nowhere close to the maximum benefit amount, and that's OK. By knowing the three factors that affect your benefit amount, you can still take steps to get as close as possible to the maximum payments.
For example, maybe you can't reach the wage cap, but you can delay benefits. That alone could boost your payments by hundreds of dollars per month. Or perhaps you can't wait until age 70 to file, but you can delay Social Security from age 62 to 65. That, too, will increase the size of your checks.
Reaching the $4,555 monthly payments may be an unrealistic goal for many people, but that doesn't mean you can't still increase your benefits. By taking even small steps to earn more per month, you can set yourself up for a more financially secure retirement.
