(Sam Swenson, CFA, CPA)
Reaching the maximum Social Security benefit is no easy task, which is why only a small percentage of retirees actually receive it. For one thing, the steps to earning $4,194 monthly checks are concrete and mathematical. On the other hand, you will also have to be lucky enough to work steadily for several decades. Y win quite a bit along the way.
Here, we’ll go over what you’ll need to do to qualify for Social Security’s biggest monthly check.
Earn the base Social Security minimum wage for 35 years
Social Security is calculated in the same way as an insurance product. In other words, the amount you enter into the system throughout your work career will have a direct impact on the amount you will receive later when claiming benefits.
People are also reading…
This threshold has increased steadily over the past 80 years, from $3,000 in 1935 to $147,000 in 2022. You would need to earn at least this amount and pay Social Security tax on it for the highest 35 years of earnings.
The 35 years of earnings do not have to be consecutive. This means you could work for 40 years, miss the Social Security threshold in five of them, and still post maximum Social Security earnings in the other 35.
In short, the more you put in, the more you get back later.
Wait to claim benefits until age 70
By deferring your Social Security claim until age 70, you are allowing your potential monthly benefit to increase. Retirees who apply for benefits at age 62 will receive only partial benefits, while those who wait until age 67 (full retirement age (FRA)) will receive exactly what they are entitled to receive, but no more.
Once you claim Social Security, you will receive a monthly check until your death (unless you decide to reverse your decision within a year of your first claim). An earlier claim will reduce the monthly benefit amount as it is projected to be paid over a longer period of time, while a later claim will increase the monthly benefit amount.
If you are in good health and can afford to wait, your monthly check will increase by 8% for every year your claim is delayed. Remember: To actually receive the maximum Social Security benefit, you must have earned the maximum Social Security wage base for 35 years. Y delay filing your claim for benefits until age 70.
Putting Social Security in Perspective
According to the Social Security Administration (SSA), only 6% of workers earn the maximum Social Security taxable threshold in any given year. To earn more than base salary Y doing so for 35 years represents an even smaller minority. If you managed to do this and can wait until age 70 to apply for benefits, consider yourself very lucky.
The reality is that the decision to take Social Security is often a complex one, encompassing both financial and non-financial considerations. Try not to feel too much pressure to qualify for the maximum benefit, as this is an extremely difficult goal to achieve and can be affected by broader issues such as health or family dynamics. Instead, consider pursuing a satisfying career that pays well enough and decide on Social Security later in life.
Will you receive the maximum monthly check?
Although a minority of people actually receive a monthly check of $4,194, it is definitely possible to be one of those people. You’ll need to make sure you earn at least the maximum Social Security taxable wage base for 35 years, and you’ll also need to delay applying for benefits until age 70.
Consider focusing on a well-paying career that you find exciting, while also considering what that means for the future. If you’re lucky enough to be in good health until age 60, you may be in the conversation for the higher monthly benefit when your 70th birthday rolls around.
The $18,984 Social Security Bonus Most Retirees Completely Overlook
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: An easy hack could pay you up to $18,984 more… every year! Once you know how to maximize your Social Security benefits, we believe you’ll be able to retire with the confidence and peace of mind we all seek. Simply click here to find out how to learn more about these strategies.
The Motley Fool has a disclosure policy.