There’s no guesswork needed if you’re trying to figure out how close you are to the rarely seen amount.
It was never intended to be the entirety of your retirement income. Still, for most people, Social Security benefits are an important source of cash in their golden years. And for a lucky few, it can be a relatively rewarding government-run program, with monthly checks as high as $4,555 this year after the recent adjustment for inflation.
But how does one cash in to this degree? Here’s what you have to do if you’d like to maximize your eventual Social Security retirement benefits.
1. Work for at least 35 years
There was a time when working for 30 years was a long career. As time marches on, though, so do our lifespans. The average lifespan in the United States now stands at 76.1 years, according to data from the Centers for Disease Control, with plenty of people living far longer than that. That’s why it’s not unusual for people to work full-time for 40 years these days, if not longer.
If you want to max out your Social Security income, though, you’ll have to work full-time for at least 35 full years. That’s because the Social Security Administration (SSA) bases its calculation of your monthly check on the 35 years you’ve earned (relatively) the most; working more than 35 years won’t necessarily help.
If you’re not going to work a total of 35 years, don’t sweat it too much. The SSA simply adds up your total earnings for all the years you did work, adds nothing to the tally for the years you didn’t earn anything, and then divides the sum by 35 to come up with its figure. You won’t be collecting the maximum possible payment, but you’ll still get pretty close if you worked for most of that time.
2. Earn the maximum taxable income per year while you’re working
Maximizing your Social Security benefits isn’t just a matter of working for 35 years, however. You also have to earn quite a bit of taxable income to reach the $4,555/month mark. Indeed, you have to reach the Social Security’s maximum taxable income threshold every year for your highest-earning 35 years. For 2023, that’s $160,200.
Like Social Security retirement benefits themselves, this threshold is raised every year more or less in step with inflation. Last year’s max was $147,000. The year before that, it was $142,800. 10 years ago, only the first $113,700 of your wages was taxable for Social Security purposes. 30 years ago the cap was $57,600. You would have had to meet or exceed 35 years’ worth of maximum SSA-taxed income to take home the maximum possible retirement benefit now.
3. Wait until you’re 70 to claim retirement benefits
Last but not least, only people who are already 70 years old — or will turn 70 during the year — before claiming are eligible for Social Security payments of $4,555 per month this year. If you’re 62 years old and intend to claim your retirement benefits in 2023, your best possible monthly payment is only $2,572, even if you’ve been a high earner for 35 years. If you met the first and second conditions laid out here and are 65 years of age, your monthly check will be on the order of $3,600.
These differences reflect the prospective amount of time you’ll likely be drawing from Social Security’s pool of funds. Anyone drawing at 62 years of age will draw, on average, eight years longer than someone claiming benefits at the age of 70. To keep things fair for people who choose to work longer or delay their future payments, monthly payouts are equitably adjusted.
Don’t stop there
If you know you’re never going to be taking home Social Security’s biggest possible retirement checks, don’t beat yourself up. Most people don’t. The average monthly Social Security check right now is slightly more than $1,800.
The thing is, you can still secure a healthy retirement even if you’re earning just-average wages. The key is time, and consistent savings. Tucking away a few thousand bucks per year can mean saving a seven-figure stash over the course of 30 or 40 years. But you have to keep pouring money into your retirement account, even when it’s not easy to do so. And you have to invest in the stock market even when sticking with stocks feels uncomfortable. It’ll be worth it in the end.
Even if you don’t have 30 or 40 years left to save, though, it’s never too late to start doing something to build a nice-sized nest egg.
