The average senior on Social Security is eligible for a monthly benefit of $1,657. But some seniors will collect a lot more money than that.
The highest monthly benefit Social Security recipients can collect this year is $4,194. But snagging that benefit isn’t an easy feat to accomplish. If you want to set yourself up for the maximum Social Security benefit, here’s what you need to do.
1. Work a minimum of 35 years
The monthly Social Security benefit you’ll be eligible to collect in retirement will hinge on what your wages look like during your 35 highest-paid years on the job. For each year within that top 35 you go without an income, you’ll have a $0 factored into your benefits calculation. And even a single $0 earnings year could ruin your chances of being able to claim the maximum monthly benefit.
2. Earn an income for 35 years that matches or exceeds the annual wage cap
You may have noticed that you lose a portion of your income to Social Security taxes. Those taxes are crucial in funding the program. But if you’re a higher earner, you don’t pay Social Security taxes on all of your earnings. Rather, there’s an annual wage cap that changes from year to year.
This year, the wage cap for Social Security taxes is $147,000. Not only are earnings beyond that point not subject to Social Security taxes, but they also don’t count toward calculating your benefit. If you want to snag the highest possible Social Security benefit, you’ll need to earn an income for 35 years that matches or exceeds the wage cap.
3. Delay your filing as long as possible
You’re entitled to your full Social Security benefit based on your earnings history at full retirement age, or FRA. If you were born in 1960, FRA is 67. Otherwise, it’s either 66, or 66 and a specific number of months.
For each year you postpone your filing past FRA, however, you’ll earn delayed retirement credits. Those credits are worth 8% a year, and once you turn 70, you can no longer accrue them. But if you want to snag the maximum Social Security benefit, you’ll need to wait until age 70 to sign up to get benefits.
What if you can’t claim the maximum Social Security benefit?
To be clear, most seniors are not able to qualify for the maximum monthly benefit Social Security is paying. But if that’s the case for you, it doesn’t mean your retirement is ruined.
First of all, even if you don’t qualify for a benefit worth $4,194, your monthly payday might come close. And also, in reality, Social Security should not be your only retirement income source. Rather, you should have a healthy nest egg to fall back on to supplement those benefits, and, if possible, additional income sources on top of that.
In fact, if you do a good job of saving money for retirement, you may not have to worry about what Social Security pays you. So while it’s OK to go after as high a benefit as possible, a better use of your energy is to work hard to fund your IRA or 401(k) so you have a healthy level of savings to access during your senior years.