In 2022, the maximum Social Security benefit is $4,194 per month. But the average monthly benefit? It won’t be anywhere near.
The average check for retired employees was $1,562 in October 2021. If you take into account the 5.9% adjustment in the cost of living (COLA) that Social Security recipients will receive in the new year, someone currently earning $ 1,562 will see their payments rise to $1,654.
To get the maximum Social Security benefit, you need to do three things:
- Wait until you’re 70
- Worked for 35 years
- Earn maximum Social Security taxable income for at least 35 years
Wondering if you’ll get there? Let’s break down each requirement a little further.
Can you wait until you are 70?
Retired employees can receive benefits at the age of 62 or only at the age of 70. But applying for benefits at age 62 rather than waiting until your full retirement age (FRA) — which is between 66 and 67, depending on when you were born — cuts your benefit by about 30%.
On the other hand, for every year you defer after full retirement age, you’ll earn an 8% deferred retirement credit until your payout hits 70. Claiming at age 70 yields benefits that are approximately 77% higher, compared to claiming at age 62.
The average age for starting benefits has risen over the past two decades. But very few employees last until the age of 70. In 2018, the average claim age was 64.7 years for men and 64.6 years for women. Nearly 90% of people aged 65 and older received Social Security benefits at the end of 2020.
Are you going to work for at least 35 years?
To receive the maximum Social Security benefits, you must have worked for at least 35 years. Social Security bases your benefits on your highest income of 35 years, which we will explain in more detail shortly. If you only work for 34 years, Social Security will use that 34 year of income and enter the 35th year as $0. If you’re short even one year, you won’t be able to receive the maximum benefit.
Are you a high earner?
To collect the largest possible Social Security check, you must also receive a large salary for at least 35 years. To get the maximum benefit, you must earn the maximum Social Security taxable income for 35 years or more. In 2021, that amount will be $142,800. It rises to $147,000 in 2022.
By comparison, full-time workers had an average weekly wage of $1,001 in the third quarter of 2021, according to data from the U.S. Bureau of Labor Statistics. That works out to $52,052 per year.
Since 1983, only about 6% of workers have earned more than Social Security’s maximum taxable income in any given year. Few workers earn that much over 35 years. Therefore, your payments are unlikely to exceed the maximum, regardless of how long you work or defer benefits.
Why You May Not Want the Maximum Social Security Benefit?
You are highly unlikely to qualify for the maximum Social Security benefit. So the question really is, should you persist for the greatest possible benefit you could receive?
Delaying Social Security after age 62 to increase your benefits can be a smart move, especially if you enjoy working or are short on retirement savings. But many people cannot afford to make the most of it, as seniors are often forced out of the workforce earlier than they anticipated. There is also quality of life to consider. By taking a lower benefit earlier, you can enjoy your retirement years more.
You should also consider your life expectancy. You would have to turn 78 to get more out of Social Security by claiming at age 70 versus 62. Obviously none of us can predict when we will die, but the certainty that we will collect money sooner may be worth the unknowns associated with waiting longer.
Regardless of whether you want your benefits early or late, try to invest at least 15% of your pre-tax income in a retirement account. Your senior years will be much easier if Social Security is not your only source of income.