The amount of your Social Security benefit is influenced by your age and the length of your career. To reach the maximum monthly payment, it is crucial to have made sufficient contributions to the program over time through payroll taxes.
The Social Security Administration (SSA) calculates your benefits based on your 35 highest years of earnings. These earnings are adjusted to account for changes in wage levels. If your career is shorter than 35 years, you will not reach maximum eligibility.
Keys to Score the Maximum Social Security Benefits: Up to $4,873 a Month
Age also plays a significant role, but, we’ll have to submerge a little bit more in the details. For example, if you were born in 1960 or later, and you start claiming Social Security at age 62, the minimum eligibility age, your benefit will be 30% lower than if you retire at age 67, the full retirement age. However, the benefit increases by a certain percentage each month that you delay taking it beyond the full retirement age, up to age 70.
Just a few additional years of work can make a big difference. The average retirement age reported in the United States in 2022 was 61, according to Gallup, compared to 57 in 1991.
Social Security is funded by a federal payroll tax, which requires you to pay 6.2% of your wages. Your employer is required to pay the same percentage on the same earnings. If you are self-employed, you must cover both sides and pay 12.4%.
These tax requirements only apply to a limited portion of annual earnings, known as the benefit base, which is adjusted periodically based on general wage changes in the U.S. workforce. The benefit base is currently set at $168,600.
This six-figure figure is the main reason why maximizing Social Security benefits is so challenging. To reach the full amount of monthly payments, you need to earn the benefit base or more for 35 years and retire at age 70. To put things in perspective, the average weekly earnings of full-time wage and salary workers in the third quarter of 2023 were $1,118, or $58,136 per year, according to the U.S. Bureau of Labor Statistics. In other words, you need to be a high-income wage earner for the vast majority of your career.
How Much You Need to Earn to Score the $4,873 Retirement
The maximum Social Security benefit in 2024 is substantial: $4,873 per month, which is equivalent to $58,476 per year. However, reaching that figure requires a high salary. Below, we outline how much you need to earn and when you should start taking benefits.
To reach the maximum monthly benefit, you need to earn at least the benefit base for each year of your career. If you earn more than the benefit base, your benefit will be based on your actual earnings. For example, if you earn $168,600 for 35 years, your maximum monthly benefit will be $4,873. If you earn $200,000 for 35 years, your maximum monthly benefit will be $5,200.
When You Should Start Taking Benefits
The earlier you start taking benefits, the lower your monthly payment will be. This is because benefits are calculated using a formula that takes into account your age and the number of years you have worked.
For example, if you earn $168,600 for 35 years and start taking benefits at age 62, your monthly benefit will be $2,710. If you wait until age 70 to start taking benefits, your monthly benefit will be $4,873.
The decision of when to start taking benefits is a personal one. You need to weigh the pros and cons of receiving a lower monthly payment now versus a higher monthly payment later.