Here’s Exactly How to Optimize for the Social Security Monthly Max

Receiving the maximum Social Security benefit is no easy feat. Simply put, it requires hitting a few important milestones over your working career and waiting several more years to finally claim benefits. As you might expect, those who pay into the system at the highest rate over a long time span are those most likely to hit the max payouts.

Below, you’ll find the three things you’ll need to do to optimize your Social Security payments in retirement.

1. Defer filing for benefits to age 70

While this is not an option for many people as they’ll need the money well before age 70, the story goes that the longer you wait to claim benefits, the more you’ll receive. If you claim benefits at 62, you’ll receive about 30% less than if you had waited until your Full Retirement Age (FRA), now age 67 if you were born after 1960. At your FRA, you’ll receive 100% of your standard benefit.

If you want to go for the maximum possible benefit, and instead of filing at age 67, you can wait a few years and claim at age 70. For every year past your FRA, you’ll receive an 8% increase in monthly benefits — this is likely to be a return far higher than you’ll receive on any guaranteed income product offered in the market right now. The increase in benefits past FRA stems from delayed retirement credits, which are actuarial adjustments for not having claimed benefits sooner.

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2. Hit the maximum wage base for 35 years

Part of receiving the maximum monthly check in retirement is a direct product of having paid in the maximum amount possible over your working career. Your Social Security benefit is calculated by taking the amount of tax you paid to the Social Security Administration (SSA) in your highest-earning 35 years. If you only worked for 15 years before stepping away from paid work, you’ll have years of zeros averaged into your final calculation and will thereby receive a smaller benefit.

The maximum Social Security wage base in 2021 is $142,800, and it will increase to $147,000 in 2022. This means that all earnings up to these amounts will be taxed at a rate of 6.2%, and you’ll receive the maximum Social Security credit for these years. As long as you earn enough to hit the maximum wage base in your highest-earning 35 years, you’ll be in a position to receive the maximum monthly check in retirement.

3. Replace lower-earning years

Suppose you had to take time away from work in your 20s or 30s to care for a family member with a serious health condition or bond with a new baby. While these circumstances are normal, understandable, and legitimate, these years will reflect zero earnings when it comes to your Social Security calculation at retirement. Unfortunately, this means you’ll receive less money than you would have otherwise if you kept working.

The good news is that the SSA calculates your monthly retirement benefits using your 35 highest-earning years. This means that if you were to keep working in at least some capacity in your 60s, you could replace some of the zeros weighing down your average. Even if you don’t hit the annual maximum wage base in these years, you can get a higher overall benefit by earning even a part-time wage and contributing some money into the tax system.

Straightforward but not easy

For you to claim the maximum Social Security benefit, the stars must align in a very certain way over the course of your working career. You’ll need to consistently earn a high income and have the luxury of delaying your benefit claims until age 70. This is dependent on a long list of factors, but your health, as well as your desire to continue working for nearly four decades, are certainly relevant considerations.

Even if you don’t hit the maximum benefit payment, don’t fret. Many factors, both financial and non-financial, feed into the decision to take Social Security. What you can do, however, is know the rules and try to give yourself the best chance at earning a healthy monthly check in retirement.

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