Here’s Exactly How to Maximize Social Security’s $4,194 Monthly Maximum | Smart Change: Personal Finances

(Kailey Hagen)

A monthly Social Security check of $4,194 could help fund a fairly comfortable retirement, especially if you also have personal savings. But few people manage to get out of it. If you’re up for the challenge, here are the three steps you need to take to lock in the maximum Social Security benefit.

First step: Work at least 35 years

The Social Security Administration considers your income during your 35 highest earning years, adjusted for inflation, when calculating your benefit. You may still qualify for Social Security if you haven’t worked that long, but you’ll receive smaller checks due to zero-earning years accounting. If you only work 30 years, for example, you will have five zero-years of income weighing on your benefits.

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Working over 35 could increase your benefits. This isn’t the case for everyone, but many people earn later in their careers than they did when they first entered the workforce.

Once you have worked over 35, the government will ignore some of those earlier low-earning years when calculating your benefits and include more recent, high-earning years. This results in larger benefit checks than what you would get if you stopped working at age 35.

Step Two: Earn the equivalent of $147,000 in 2022 dollars in each of those years

This step is why most people are unable to earn the maximum Social Security benefit of $4,194. This requires a high income which is out of reach for most Americans. Even if you manage to earn six figures, you need to be able to do so for 35 years to claim the biggest checks.

In future years, the bar you will have to reach to claim the maximum benefit will be even higher. For 2022, $147,000 is the maximum income subject to Social Security tax. But that’s expected to rise to around $155,100 for 2023. In years past, that figure was lower.

At the end of the day, you still have to pay the maximum Social Security tax if you want the highest Social Security benefits. In reality, this won’t happen to most people, but that’s okay. You can always use this information to your advantage.

Anything you can do today to increase your income will also help your Social Security benefits. Things like negotiating a raise, getting a better paying job at another company, or working overtime are all acceptable. You can also consider starting a side business if you are interested.

Step Three: Wait until age 70 to register for benefits

The government assigns everyone a full retirement age (FRA) based on their year of birth, and it uses that information, along with a person’s income, to determine the amount of their Social Security checks. For workers today, FRA is somewhere between 66 and 67.

You can claim from age 62, but registering before your FRA reduces your checks. Those who sign up at age 62 get 25% less per month if their FRA is 66 or 30% less if their FRA is 67.

Delaying benefits increases your checks a little at a time until you reach your maximum benefit at 70. Those who do receive an additional 24% per month if their FRA is 67 or 32% if their FRA is 66. And that extra boost is key if you want the $4,194 monthly benefit.

But that doesn’t mean delaying benefits is always your best decision. If you have a terminal illness or are in dire need of financial assistance, it is wise to register early. But those who think they’ll reach 80 or beyond and can afford to delay, often end up with greater lifetime benefits by doing so.

It can be a little disappointing to know that the maximum Social Security benefit is out of reach. But now that you know a little more about how the government calculates benefits, you can start researching your own maximum benefit. Think about when you want to apply for Social Security and review it every year when reviewing your retirement plan. Don’t be afraid to make changes if your retirement plans change over time.

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