One of the better social programs America offers is Social Security. Its retirement benefits have been around for decades and have helped many Americans maintain some financial stability in their later years. For some people, it's all or most of their retirement income, and for others, it's a portion. Either way, it plays a pivotal role in providing a financial safety net.
As of 2024, the maximum Social Security benefit is $4,873 per month, an attractive amount that many will aim for. If you have ambitions for receiving this payout, there are two things you need to do first.
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1. Consistently earn above the wage base limit for at least 35 years
Almost all American workers pay Social Security taxes on earned income (a few exceptions exist for some groups). But not all income is subject to Social Security taxes, just up to a certain amount, called the wage base limit. That limit is important because of how the Social Security Administration (SSA) calculates your monthly benefit.
It determines your monthly benefit using your earnings during the 35 years they were the highest. Your earnings are adjusted for inflation and then divided by the total number of months in those 35 years to get your average indexed monthly earnings (AIME).
To be eligible to receive the maximum $4,873 monthly benefit, your earnings must have been at or above the wage base limit for all of the 35 years that Social Security uses to calculate your benefit. Earning at least the wage base limit for 34 years and less in one year would disqualify you from receiving the maximum benefit.
For 2024, the wage base limit is $168,600, but it's adjusted for inflation every year. For perspective, here are the wage base limits from the previous five years:
| Year | Wage Base Limit |
|---|---|
| 2023 | $160,200 |
| 2022 | $147,000 |
| 2021 | $142,800 |
| 2020 | $137,700 |
| 2019 | $132,900 |
Data source: Social Security Administration
If the five years in the above table will be used in your calculation, you would need to have earned at least those amounts. It's essential to keep up with the annual wage base limit because you might have exceeded it in a given year and fallen below it the next year because of the inflation adjustment.
2. Plan to delay claiming benefits until you turn 70
Your full retirement age (which is based on your birth year) is when you're eligible to receive your primary insurance amount, but you can claim before or after that. Claiming benefits before your full retirement age reduces them, and delaying past that increases them by two-thirds of 1% each month until you turn 70 (8% annually).
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Earning above the wage base limit for 35 years is only half the equation for achieving the maximum Social Security retirement benefit. The other half is delaying benefits until you reach age 70. You can delay benefits past 70, but they won't increase any further.
Receiving the maximum benefit is a two-step process; meeting the earnings requirements but claiming benefits before 70 would eliminate the chance of receiving the maximum.
Don't forget to check your earnings record
It's crucial to understand that very few people will receive the maximum benefit, mainly because of the earnings requirements. The SSA says that only roughly 6% of people earn above the wage base limit in a given year, and far fewer are able to do so for 35 years.
If you're teetering on the earnings limit and unsure where you stand, checking your earnings record on the SSA website (SSA.gov) is a good idea. You can see your reported earnings for a given year as well as an estimate of your future benefits. It will show your estimated monthly benefit based on whether you claim early, at your full retirement age, or delay past then.
Regardless of eligibility for the maximum benefit, you should approach retirement with the idea that Social Security will be supplemental income. This mindset helps ensure you use all resources to be as financially prepared as possible.
