Here’s Exactly How to Maximize Social Security’s $4,194 Monthly Maximum
You’ll often hear that retiring on Social Security alone could mean running out of money as a senior. But that assumes you don’t receive the maximum monthly benefit of $4,194.
If that’s the amount you’re entitled to, that means Social Security could end up providing you with over $50,000 in annual income. And if you’re the type to live frugally, you could very well get by on an income like that.
But most seniors aren’t actually able to claim a monthly Social Security benefit of $4,194 — not even close. And if one of your goals is to hit the maximum monthly benefit, you’ll need to commit to it well before retirement — and hope the stars align in your favor.
The maximum social security benefit is not easy to obtain
There are three specific things you will need to do to claim the maximum monthly Social Security benefit:
- Work at least 35 years
- Earn a salary high enough to meet the annual Social Security salary cap for 35 years
- File with Social Security at age 70
Some of these things are easier to do than others. If your health cooperates, you could manage to spend 35 years in the workforce. This remains true even if you end up taking a few years off, whether to raise children or for some other reason.
Likewise, as long as you find yourself in a position where you can work into 70 or tap into other sources of income, delaying your filing until that point may be doable. And claiming benefits at age 70 means locking in the highest monthly Social Security salary you’re entitled to (assuming you’re claiming a benefit based on your own earnings).
But it’s the middle step that’s a bit harder to pull off. You can work your best, work overtime, and strive to be the best employee your company has ever seen. But if you’re not in a particularly lucrative field, you might struggle to earn enough to meet the annual Social Security salary cap.
Each year, a salary cap is put in place to determine the amount of income taxed for Social Security purposes and the amount of income taken into account in calculating your future Social Security benefits. This year, the salary cap is $147,000. Last year it was a little lower and next year it is likely to increase.
Earning the equivalent of the annual salary cap may not be possible if your career is not conducive to very high salaries. So even if you commit to working for 35 years and also delay your filing until age 70, you may not reach the maximum monthly benefit.
This, however, need not be a source of stress or disappointment for you. Most seniors receive nothing close to $4,194 a month from Social Security. And if you do your part to build a solid nest egg, you might be able to do just fine in retirement with half the monthly benefit.
Likewise, if you are able to budget carefully and prioritize the things you splurge on as a retiree, you may find that you are able to get by on less income than expected. . Rather than worrying about preparing for the maximum monthly Social Security benefit, you can instead develop a savings strategy and find a way to live comfortably as a senior without spending a fortune.