Unlocking the potential to earn up to $4,873 per month in Social Security benefits can be a game-changer for your retirement. Social Security is a significant income source for millions of older adults, with some retirees relying entirely on these benefits.
According to a 2023 report from the Nationwide Retirement Institute, around 1 in 5 adults aged 50 and older have no other source of retirement income outside of Social Security. If you find yourself depending on these checks to make ends meet, it’s crucial to maximize your benefits as much as possible.
Steps to get closer to a Social Security of $4,873
This year, the maximum amount you can collect from Social Security is an impressive $4,873 per month, up from $4,555. Keep in mind that not everyone will reach this peak, following these steps can help you get as close as possible.
To qualify for retirement benefits, you generally need to have worked and paid Social Security taxes for at least 10 years. However, your benefit amount is calculated based on your highest-earning 35 years of work.
Therefore, it’s essential to ensure you have a solid work history spanning at least 35 years to maximize your potential benefits. By strategically planning your career and earnings, you can significantly enhance your Social Security payments, giving you a more comfortable and secure retirement.
Understanding how your Social Security benefits are calculated is crucial for planning your retirement. The Social Security Administration (SSA) takes into account an average of your wages over 35 years, runs it through a complex formula, and adjusts for inflation. The result is your full benefit amount, which is the amount you’ll collect by filing at your full retirement age (67 if born after or in 1960).
Maximizing Your Social Security Benefits
To earn the highest possible benefit, it’s essential to have worked for at least 35 full years. If you haven’t, zeros will be added to your earnings average for any years you weren’t working, which can significantly decrease your benefit.
Ensure You’ve Met the Contribution and Benefit Base Limit
In general, the more you earn, the higher your benefit amount will be—up to a certain limit. This cap is known as the maximum taxable earnings limit, which is the highest income subject to Social Security taxes. Any income earned over this limit is not subject to Social Security tax and will therefore not increase your benefit amount. Summing up:
- Work for at least 35 years to avoid zeros in your earnings average.
- Understand the maximum taxable earnings limit to maximize your benefits.
- Plan ahead to ensure you file for Social Security at your full retirement age.
By keeping these key factors in mind, you can better prepare for a financially secure retirement and make the most out of your Social Security benefits.
The wage cap changes annually to account for inflation. In 2024, this cap is set at $168,600 per year, up from $160,200. To maximize your potential monthly payments, it’s important to have consistently hit this limit throughout your career. For some context, if you started your career 35 years ago in 1989, the wage cap was $48,000 per year.
Delay Filing for Retirement Until You Turn 70
Even if you’ve worked for at least 35 years and consistently reached the wage cap, claiming your benefits before age 70 will result in smaller monthly payments.
The most you can receive by claiming at age FRA is $3,822 per month. At age 62, the maximum possible benefit is just $2,710 per month—roughly half of the $4,873 payments you’d collect at age 70. To truly maximize your benefits, waiting until age 70 to file is crucial.
What If You Can’t Reach These Benchmarks?
The vast majority of workers won’t be able to achieve all three of these goals, and that’s perfectly fine. However, this doesn’t mean you can’t increase your payments at all.
- Work as long as possible: Extending your career can have a significant impact on your benefits.
- Increase your earnings: Higher annual earnings can help you reach closer to the wage cap.
- Delay claiming benefits: Even if you can’t wait until 70, delaying beyond the earliest eligibility age will still boost your monthly payments.
Remember, every little bit helps when it comes to maximizing your benefits. Focus on what you can control and make informed decisions to improve your financial future.
