Are You in Spitting Distance of the $3,895 Social Security Max Benefit?

Last year, the average retiree’s monthly Social Security check paid $1,544. Some got more, while others got less, as the size of these payments more or less correlates with recipients’ earnings during their working years. But, that dollar figure is a rough idea of how much the average person will be collecting from the government-run program once they’re done working.

That typical amount, however, is less than half the maximum monthly Social Security benefit some retirees are (or soon will be) receiving. Specifically, a lucky handful of people are eligible for this year’s maximum monthly benefit of $3,895.

Are you poised to be one of those retirees? Here are the three key requirements to achieve the maximum monthly payment offered by the Social Security Administration’s (SSA) retirement supplement program.

You’re 70 years old (or will be when you retire)

The longer you can wait to begin collecting your Social Security benefits, the better, as the longer you wait, the bigger they are. Once you reach the age of 70, however, the SSA stops giving you what’s called delayed retirement credit. You may as well start collecting then, as waiting any longer no longer expands the monthly payment.

For perspective, assuming all other requirements for the maximum benefit are met, the most that anyone retiring at the ages of 62, 65, and 66 can collect on a monthly basis this year is $2,324, $2,841, and $3,113, respectively.

You’re a high-income earner

In the same sense that waiting beyond the age of 70 to retire doesn’t bolster your prospective monthly payments any further, the Social Security Administration also caps the amount of your income used in the calculation of your monthly benefit. For 2021, only up to the first $142,800 of your annual earnings are considered in this personalized calculation. Fortunately for those earning more, the SSA also stops taxing income above $142,800.

Image source: Getty Images.

It’s a figure that comes with a major footnote. That is, this maximum earnings figure is always on the rise, reflecting the ever-rising cost of living. In 2011, the Social Security tax income cap was $106,800. In 2001, that ceiling stood at $80,400. As long as you’ve earned at least as much as the SSA’s historical income cap each year you’ve worked, you’re still due the maximum monthly payment of $3,895.

You’ve reached the SSA’s taxable income cap for at least 35 years

Finally, although they don’t have to be consecutive, you must have earned the maximum applicable (and FICA-taxable) income for at least 35 years to collect the biggest possible monthly Social Security payment.

This requirement can be a bit confusing. Even if you worked more years than the minimum of 35 years necessary to maximize your benefit, if in some of these years you didn’t reach the income cap, then the lower average annual income could seemingly lower your benefit once you retire.

That’s now how the Social Security Administration does its math though. When calculating your monthly payment once you’re ready to start collecting, the SSA only considers the 35 years in which you earned the most money.

Don’t get discouraged

Are you nowhere near the maximum Social Security benefit, and know you can’t keep working until you’re 70? Don’t sweat. Most people aren’t receiving this much money from the government-run program (and most people who are still working also won’t see monthly checks of this size either).

About two-thirds of retirees collected monthly checks of between $1,000 and $2,500 last year, while only about 2% of all beneficiaries saw a monthly check of more than $3,000.

The thing is, it doesn’t entirely matter. Even if you’re not on pace to max out your Social Security benefits, you can still build a nice retirement for yourself outside of the program.

In fact, achieving merely average returns on an investment of only a few thousand dollars per year can easily make you a millionaire. The trick is simply committing to making that investment every year for at least 30 years. You’re waiting at least that long for your Social Security benefits to become available anyway.

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