Why the $4,194 Max Social Security Benefit Is a Fantasy

Social Security income is likely to be critical to many, if not most, of us in retirement, so it’s natural to want to collect as much as possible from the program. There are multiple ways to increase your benefits, but no matter what you do, you’re not likely to end up with the maximum monthly benefit of $4,194 — and most of us are not likely to come close.

Here’s a look at why that $4,194 maximum Social Security benefit is beyond our grasp — along with some ways to beef up your benefits anyway.

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What to expect

Let’s set the stage first. Many people have no idea what kind of income Social Security offers. It was actually designed to only provide about 40% of pre-retirement income, so don’t be surprised if it delivers less than you thought.

Recently, the typical monthly Social Security retirement benefit was $1,661 — about $20,000 annually. If you earned higher-than-average wages while working, you’ll collect more, but not necessarily a lot more. (And, of course, if you earned less than average, perhaps because you stayed at home for multiple years caring for kids or parents, you may collect less than that $1,661 check.)

Don’t settle for knowing about average benefits, though — you can get an idea of what you can expect to receive by going to the Social Security Administration (SSA) website’s “my Social Security” nook and setting up an account there. After doing so, you can go back anytime to see the latest estimates of your future benefits, based on the latest earnings information the SSA has. (PSA: If you spot any errors, have them fixed, as they can affect your future benefits.)

The big benefit — $4,194

Now let’s look at that $4,194 benefit. According to the SSA:

The maximum benefit depends on the age you retire. For example, if you retire at full retirement age in 2022, your maximum benefit would be $3,345. However, if you retire at age 62 in 2022, your maximum benefit would be $2,364. If you retire at age 70 in 2022, your maximum benefit would be $4,194.

That explanation leaves out a key factor: Not only is your benefit affected by when you start collecting it, it’s also determined primarily by your earnings history. That maximum benefit goes to those who have earned the maximum earnings allowable during their working lives — and who have also delayed starting to collect their benefits until age 70.

You might be relieved to know that maximum earnings aren’t in the millions of dollars. There’s an earnings cap specified for each year, and it’s an income level beyond which Uncle Sam doesn’t take out any taxes for Social Security. For 2022, that limit is $147,000. So you’d need to earn at least $147,000 in 2022 — and the equivalent sum in each of the 35 working years that count toward your Social Security benefit.

Most of us don’t earn close to $147,000 annually, and we have not enjoyed similar incomes in years past. That alone disqualifies us from the maximum benefit.

Another disqualification is this: Many people cannot — or will not — delay starting to collect their benefits until age 70. (Delaying starting to collect past your full retirement age will increase the size of your checks by about 8% per year.) You can start as early as age 62, and many people simply need that income at 62 or 63 or 64. Starting to collect before your full retirement age means your benefits will be smaller, but you’ll get many more checks than if you’d waited. Lots of people lose jobs unexpectedly or suffer health setbacks or simply have to leave the workforce early — so waiting until age 70 can be impossible.

Increasing your Social Security benefits

Remember, though, that while you may not come close to that maximum $4,194 benefit, you may still be able to make your ultimate checks significantly bigger. There are multiple ways to increase your Social Security benefits. For example, you might be sure to work a full 35 years, because the formula used to determine your benefits averages your (inflation-adjusted) earnings from the 35 years in which you earned the most. So if you work only 28 years, there will be seven zeroes factored into the calculations, and working more years will increase your benefits.

If you have worked 35 years and you’re earning more now than ever (on an inflation-adjusted basis), you might work a few more years so that each additional high-earning year can kick out your lowest-earning year. That, too, can beef up your benefits.

If your income isn’t that spectacular now, you might aim to hike it by taking on a side gig or two for one or more years. Or try asking for a raise more often — you may be surprised and get one.

So don’t get too sad about not getting that maximum Social Security payout. Very few people do. Instead, focus on trying to increase the benefit that you are likely to receive. Learning more about Social Security can help, too.

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