Here's some depressing information. As of April, the average monthly Social Security benefit was $1,915. On an annual basis, that's nearly $23,000. Few of us would look at that as an income we could live on in retirement -- which is why it's so important to be planning for retirement and saving and investing for it, too.
Remember that the $1,915 figure is just an average. Millions collect more than that, and a few manage to collect the maximum from Social Security, which is $4,873 per month this year. It's probably safe to assume that you won't be able to snag that maximum benefit, though there are ways to increase your Social Security benefits.
Image source: Getty Images.
Here's a look at the steps you'd have to take in order to qualify for that maximum $4,873 benefit. There are three key things you'll have to do.
1. Work for at least 35 years
This may be the easiest requirement for most of us to meet -- work for at least 35 years. Why? Well, the Social Security Administration (SSA) determines your benefit amount based on your earnings in the 35 years in which you earned the most (with earnings adjusted for inflation, naturally). So if you only worked for, say, 30 years, it will be incorporating five years of zeroes in its calculations. Even if you worked 34 years, you won't qualify for the maximum payout.
Note that once you have worked 35 years, if you're earning significantly more (on an inflation-adjusted basis) than you did in the past, on average, it can be worth continuing to work for more years. That's because every year of your now-high income will kick out your lowest-earning year from the calculation, boosting your benefits to some degree.
2. Earn the maximum for 35 years
Here's the hardest qualification to meet. You'll need to earn a certain maximum sum in each of your 35 highest-earning years. That sum, often referred to as the "maximum taxable earnings," is determined by the SSA each year. For 2024, it's $168,600 (up from $160,200 in 2023 and $147,000 in 2022).
That $168,600 is the earnings cap beyond which you're not taxed for Social Security. So if you and your neighbor respectively earn $168,600 and $1,168,600 in 2024, you'll both pay the same tax into Social Security, as earnings beyond that $168,600 are not taxed.
The $168,600 sum is also the maximum earnings that count for the calculation of your Social Security benefits. So earning more than $168,600 in 2024 or more than $160,200 in 2023 won't make your future benefits any bigger. But to maximize your benefits -- to reach that peak of $4,873 per month in 2024 -- you would need to have earned at least this maximum sum in each of the 35 years that determine your benefits. See? That's a very high hurdle for most of us.
3. Delay claiming your benefits until age 70
Finally, there's this. You'll also need to have delayed collecting your benefits until age 70. That may seem like an easy thing to do, but come age 62, the earliest age at which you're able to start collecting benefits, you might really need that income. Few of us know what our futures hold.
Each of us has a "full retirement age" at which we can start collecting the full benefits to which we're entitled based on our earnings history. For most of us, that age is 66 or 67. (It's 67 for those born in 1960 or later.) If you start collecting your benefits early, your benefit checks will be smaller -- but you'll collect many more of them. Delaying beyond your full retirement age will beef up your benefit checks by about 8% for each year until age 70.
Check out the table below, which shows the effects of starting the checks rolling in sooner versus later:
|
Start Collecting at: |
Full retirement age of 66 |
Full retirement age of 67 |
|---|---|---|
|
62 |
75% |
70% |
|
63 |
80% |
75% |
|
64 |
86.7% |
80% |
|
65 |
93.3% |
86.7% |
|
66 |
100% |
93.3% |
|
67 |
108% |
100% |
|
68 |
116% |
108% |
|
69 |
124% |
116% |
|
70 |
132% |
124% |
Source: Social Security Administration.
Clearly, you'll collect bigger checks by delaying, but delaying isn't best for everyone. As you ponder when to start Social Security, consider factors such as your retirement-readiness and your expected longevity.
So that's how to qualify for that maximum $4,873 benefit -- which will likely be even bigger by the time you retire. Most of us won't come anywhere near that, but it's still possible for most of us to take steps to increase our future benefits at least somewhat. And delaying collecting is still a solid strategy for millions.
