It’s becoming harder and harder to save for retirement, and few workers have access to pensions or other sources of guaranteed income. So for many older Americans, Social Security benefits are a lifeline in retirement.
However, the average Social Security benefit amount is only around $1,500 per month, or roughly $18,000 per year. It’s challenging or even impossible for many retirees to survive on that amount, but the good news is that you can take steps to earn higher-than-average Social Security payments.
In 2021, the maximum you can collect in benefits is $3,895 per month. While not everyone will be able to achieve that amount, there are a few signs you’re on track to max out your benefits.
1. You’ve worked at least 35 years
The Social Security Administration calculates your benefit amount by taking an average of your wages over the 35 highest-earning years of your career, then adjusting that number for cost-of-living changes.
In order to earn the maximum benefit amount, you’ll need to have worked for at least 35 full years before you begin claiming Social Security. If you haven’t worked that long, you’ll have zeros added to your average to account for the time you weren’t working. Those zeros will bring down your average earnings and reduce your benefit amount.
2. You’re willing to delay claiming benefits
One of the biggest influences on your benefit amount is the age you begin claiming. You can file for Social Security as early as age 62, but you’ll receive larger payments for each month you delay claiming — up to age 70.
Even if you qualify for the maximum benefit amount, the only way to receive the full $3,895 per month is to delay benefits until age 70. If you were to claim at age 62, the most you can collect is $2,324 per month.
Keep in mind that, theoretically, you should receive the same amount over a lifetime regardless of whether you claim at age 62, 70, or any age in between. You’ll receive smaller checks if you claim early, but you’ll earn more of them over a lifetime. By delaying benefits, you’ll earn larger checks but won’t collect as many. If your goal is to earn the maximum monthly payment, though, you’ll need to be willing to delay benefits until age 70.
3. You’re reaching the maximum taxable earnings limit
The final factor in determining your monthly benefit amount is your earnings. Not only do you need to work for at least 35 years to earn the maximum benefit amount, but you’ll also need to be reaching the maximum taxable earnings limit during that time.
The maximum taxable earnings limit is the highest annual income that’s subject to Social Security taxes. If you earn more than this amount, you won’t pay any additional taxes and your benefit amount will not increase any further.
This limit changes year to year to account for adjustments in inflation. For 2021, the limit is $142,800 per year. If you started working 35 years ago in 1986, the maximum taxable earnings limit that year was $42,000. To earn the full $3,895 benefit amount, you’ll need to have been reaching these limits consistently throughout your career.
What if you can’t reach the max benefit amount?
Not everyone will be able to earn $3,985 per month from Social Security, and that’s OK. There are still ways to increase your monthly payments even if you can’t max out your benefits.
If you haven’t worked 35 years yet, that’s the first place to start. Next, consider whether you’re able to delay claiming benefits. Waiting a few years to file for Social Security can boost your income by hundreds of dollars per month, which can go a long way in retirement.
Finally, even if you can’t reach the maximum earnings limit, increasing your income even a little can affect your benefit amount. By making as many small changes as you can, you may be able to earn a big boost in benefits.
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