It’s a prevalent misperception that Social Security will provide for a comfortable retirement. For the most part, those gains won’t translate to a lot more purchasing power, especially now when living costs are skyrocketing owing to inflation.
While you might not be able to live comfortably on the average monthly Social Security income, it’s a different story if you’re in line for the maximum monthly amount. In fact, the maximum benefit available today is extremely significant.
On a monthly basis, the maximum amount you can receive from Social Security is $4,194. To be clear, the majority of seniors receive a significantly reduced benefit. Here’s what you’ll need to do if you want to get the most out of your benefit.
1. Have worked for at least 35 years
The amount you earn during your 35 most profitable years in the working will determine your monthly Social Security payout. However, if you don’t work for at least 35 years, you won’t be eligible for the maximum payout.
That’s because each year you don’t have any income on file, you’ll have a $0 put into your personal benefits equation.
2. Make the most of your profits
Social Security has a wage cap in place each year, and earnings above that barrier aren’t taken into account for calculating payments. They’re also not taxed, which keeps things balanced.
To put things in perspective, this year’s w
Because the highest income you may make this year to contribute toward your future benefit is $147,000, the maximum income you can earn this year to count toward your future benefit is — you got it — $147,000.
Your wages must meet or surpass the wage cap every year throughout your 35 highest-paid years in the workforce if you want to get the full Social Security payment.
3. At the age of 70, apply for benefits.
You are eligible for your full monthly payment based on your wage history after you reach full retirement age or FRA. Depending on when you were born, your FRA is either 66, 67, or somewhere in the middle.
If you want to collect the full Social Security payment, you won’t be able to wait until FRA to file. Instead, you’ll have to wait until you’re 70 to file.
Because you get an 8% increase for each year you wait to collect Social Security after FRA, doing so will improve your payout significantly (up to age 70).
What if you’re not eligible for the full Social Security benefit?
- Make Sure You’re Ready for a Possible Rise in Social Security Benefits!
- Tomorrow’s Social Security Payments Are Due; Verify if Your Birthday Qualifies You for the $1,657 Amount!
- Is a Partial Retirement the Key to Postponing Social Security?
While you may do your hardest to postpone retirement and register for Social Security at the age of 70, you may not be able to work for 35 years or earn enough money for 35 years to reach or exceed the wage cap. But don’t worry if that’s the case.
Most seniors won’t be able to receive $4,194 a month from Social Security, so if you think you’ll get a lower benefit, make an effort to build a solid nest egg to compensate.
If you have $1 million or more in your IRA or 401(k), you should be able to retire comfortably, regardless of what Social Security pays you.
And if you believe a $1 million savings account is out of reach, think again. You can get there by putting $500 per month into a retirement plan for 35 years and earning an average annual return of 8%,
which is a few percentage points below the stock market’s average. When you reach that time, your Social Security payout may not be as important to you.