In theory, a person who starts claiming Social Security in 2022 could receive as much as $4,194 each month. That works out to a bit over $50,000 in annual benefits and would be enough on its own to keep a person or couple well above the poverty line even in a high cost of living state. That makes maxing out your Social Security benefit a tempting target to try to achieve.
With that target in mind, it's important to recognize that Social Security benefits are very individualized. Factors such as how much you earned over your lifetime, when you earned that money, and what age you are when you start collecting all play a role in how much your take-home benefit will be. If you want to make that goal a reality for yourself, here's exactly how to optimize to take home the $4,194 Social Security monthly maximum benefit.
First — earn enough to max out your covered wages
To take home the maximum Social Security benefit, you have to have paid the maximum possible into the system for many years. For most Americans, your salary or contractor-type earnings each year, from the first dollar you earn up to some cap is subject to Social Security tax. In 2022, that limit is $147,000, which is up from $142,800 in 2021.
The total tax due is 12.4% of your salary or contractor income up to that cap. If you're an employee, you only directly see half that tax, with your employer covering the other half.
If you have two or more jobs, each employer withholds as though it were your only job. If your combined salary is high enough, that could put you in the position of having too much Social Security tax withheld from your paychecks. You can't stop that from happening, but you can get the employee portion of that overwithholding back when you file your taxes.
Next — reach that wage cap for 35 years
Your Social Security benefit is based on your highest 35 years of covered earnings. For older earnings, Social Security applies an an index factor applied based on average wages over time, to reflect the fact that wages in general have tended to increase over the decades.
If you work for fewer than 35 years, Social Security will include $0 earnings for the years you did not work. If you worked for more than 35 years, Social Security will look at your highest 35 years of covered, indexed earnings, overwriting lower-earning years with higher ones.
The upshot of Social Security's math is that you need to max out your covered wages for a total of 35 years in order to get that maximum $4,194 benefit.
Finally — start collecting at age 70
In addition to how much you earn and for how long you earn that money, the third key factor in determining the size of your Social Security benefit is the age at which you begin collecting your benefit. You can start collecting as early as age 62, but the longer you wait, up until age 70, the larger each monthly payment will be.
In order to qualify for Social Security's maximum monthly benefit, you need to wait until you're 70 to start collecting. Start sooner, and your benefit will be lower, depending on exactly how old you were when you started receiving benefits.
If the maximum is out of your reach, don't despair
Receiving the maximum Social Security benefit is something very few people will do. It takes decades of high earnings plus delayed gratification for what amounts to little more than bragging rights. Partly because of the formula Social Security uses to calculate benefits, higher-income folks face a seriously diminishing return on the taxes they paid into the system.
You get $0.90 of the first dollar of your “average index monthly earnings” back in benefits, but only $0.15 of the last dollar, if your income is past the top bend point Social Security uses but below the cap. That means there isn't all that much difference between what a generally high-income earner gets and what a person who absolutely maxes out the Social Security benefit gets. So if the absolute maximum is out of reach, rest assured that getting close is much easier than perfectly topping out the benefit.
As a result, your energy would likely be best served by focusing on the number of years of covered earnings you have and the age at which you start collecting benefits. By doing what you can on those factors, you're likely to get a better return than trying to max out your salary for decades just to get a higher Social Security benefit.
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