Social security income is likely to be crucial for many, if not most, of us in retirement, so it is natural to want to collect as much as possible from the program. There are several ways to increase your benefits, but no matter what you do, you are unlikely to end up with the maximum monthly benefit of $ 4,194 – and most of us are unlikely to come close.
Here’s a look at why the maximum social security benefit of $ 4,194 is out of our reach – along with some ways to increase your benefits anyway.
What to expect
Let’s put the scene first. Many people have no idea what kind of income social security offers. It was actually designed to provide only about 40% of early retirement income, so do not be surprised if it delivers less than you thought.
Recently, the typical monthly social security pension benefit was $ 1,661 – about $ 20,000 annually. If you earned higher than average while working, you get more, but not necessarily much more. (And, of course, if you earned less than average, perhaps because you stayed home for years caring for children or parents, you may be able to collect less than the $ 1,661 check.)
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However, do not let you just know about average benefits – you can get an idea of what you can expect to receive by going to the Social Security Administration (SSA) website “my social security“hook up and create an account there. After doing so, you can go back at any time to see the latest estimates of your future benefits, based on the latest earnings information that SSA has. (PSA: If you discover errors, you need to get them fixed as they may affect your future benefits.)
The big advantage – $ 4,194
Now let’s look at the $ 4,194 benefit. According to SSA:
The maximum benefit depends on the age at which you retire. If, for example, you retire at full retirement age in 2022, your maximum benefit would be $ 3,345. But if you retire at age 62 in 2022, your maximum benefit will be $ 2,364. If you retire as a 70-year-old in 2022, your maximum benefit will be $ 4,194.
That explanation omits a key factor: Not only is your benefit affected by when you start collecting it, it is also determined primarily by your earnings history. The maximum benefit goes to those who have earned the maximum allowable income during their working lives – and who have also postponed starting to collect their benefits until they turn 70 years old.
You may be relieved to know that maximum earnings are not in the millions of dollars. There is one earnings ceiling stated for each year and it is a level of income beyond which Uncle Sam does not charge any social security tax. For 2022, this limit is $ 147,000. So you must earn at least $ 147,000 by 2022 – and the corresponding amount in each of the 35 working years that count towards your social security benefit.
Most of us do not earn close to $ 147,000 annually and we have not had similar incomes in recent years. That alone disqualifies us from the maximum benefit.
Another disqualification is this: Many people can not – or will not – postpone their start of receiving their benefits until they turn 70 years old. (If you postpone collecting until after your full retirement age, the size of your checks will increase by about 8% per year). You can start already as a 62-year-old, and many people simply need that income at 62 or 63 or 64. Starting to accumulate before your full retirement age means your benefits will be less, but you will get many more checks than if you d waited. Lots of people lose jobs unexpectedly or suffer from health setbacks or simply have to leave the workforce early – so it may be impossible to wait until they turn 70.
Increasing your social benefits
Keep in mind, though, that even though you may not come close to the $ 4,194 maximum benefit, you may still be able to make your ultimate checks significantly larger. There are several ways to do this increase your social benefits. For example, you can be sure to work all 35 years because the formula used to determine your benefits is the average of your (inflation-adjusted) earnings from the 35 years in which you earned the most. So if you only work 28 years, there will be seven zeros in the calculations, and working more years will increase your benefits.
If you have worked 35 years and you earn more now than ever (on an inflation-adjusted basis), you can work a few more years so that every extra high-earning year can kick off your lowest-earning year. It can also increase your benefits.
If your income is not so spectacular now, you may want to strive to wander past takes on a side concert or two for one or more years. Or try asks for a pay rise more often – you may be surprised and get one.
So do not get too sad about not getting the maximum social security payout. Very few people do. Focus instead on trying to increase the benefit you is likely to receive. Learn more about Social Security can also help.
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