Your income is one of the biggest factors deciding how much you’ll receive, but not the only one.
Social Security isn’t designed to entirely replace the average worker’s income. The average retired worker’s benefit was $1,919.40 in July. That’s hardly enough to cover the basics for most retirees, who are dealing with rising housing and medical expenses every month.
If you earn enough during your career, however, you could receive a lot more from Social Security when you retire. The maximum retirement benefit this year is $4,873 per month, or $58,476 annually. That’s about the same as the median income in the United States. And that amount will climb over time thanks to annual cost-of-living adjustments.
The requirements to receive that maximum benefit are straightforward but certainly not easy to achieve. Only a tiny percentage of Americans will qualify. Here’s how you can become one.
Image source: Getty Images.
The three factors determining your retirement benefit
There are three factors that decide how much you’ll receive in Social Security retirement benefits:
- Your earnings history
- When you were born
- When you retire
Your earnings history has the biggest impact on your Social Security benefit. You have to consistently earn a high salary to even qualify for the maximum potential benefit. That’s because the Social Security Administration (SSA) looks at your entire career, adjusts every year’s earnings for inflation, and then selects the 35 highest-earning years. The average of those 35 years is the basis for calculating your benefit.
The SSA takes your average earnings and plugs that number into its benefits formula (which is partly based on the year you were born) to determine your primary insurance amount, or PIA. That’s the amount you’ll receive if you apply for benefits at your full retirement age.
That age is determined by the year you were born. Those born between 1943 and 1954 reached full retirement age at 66. The age increases by two months for each year you were born after 1954 before maxing out at 67 for anyone born in 1960 or later.
The last factor to consider is when you claim benefits. You can apply starting at age 62, but if you do so before you reach your full retirement age, you’ll receive less than your PIA.
You can also wait to claim benefits beyond your full retirement age, and if so, the government will increase your benefit for each month you delay up to age 70. For example, those with a full retirement age of 66 could receive a 32% boost to their PIA by waiting until 70 to claim (waiting beyond 70 won’t increase your benefit any further).
Maximizing your earnings history
There’s another important detail about your earnings history that affects your Social Security benefit. The SSA caps your annual earnings during your career for the purpose of determining how much you pay in Social Security tax at the rate of 12.8% (with half that coming from employees and half from their employers).
Since you’re not getting taxed on anything above that amount, the SSA doesn’t count it toward your earnings history, either. That effectively sets the bar for the salary you need to receive the maximum Social Security benefit in retirement.
The SSA updates the maximum taxable earnings limit each year to adjust it for wage inflation. The following table shows the limits for the last 50 years. If your earnings exceeded those limits for at least 35 years, you’ll be in line to potentially receive the maximum benefit in retirement.
| Year | Earnings | Year | Earnings |
|---|---|---|---|
| 1975 | $14,100 | 2000 | $76,200 |
| 1976 | $15,300 | 2001 | $80,400 |
| 1977 | $16,500 | 2002 | $84,900 |
| 1978 | $17,700 | 2003 | $87,000 |
| 1979 | $22,900 | 2004 | $87,900 |
| 1980 | $25,900 | 2005 | $90,000 |
| 1981 | $29,700 | 2006 | $94,200 |
| 1982 | $32,400 | 2007 | $97,500 |
| 1983 | $35,700 | 2008 | $102,000 |
| 1984 | $37,800 | 2009 | $106,800 |
| 1985 | $39,600 | 2010 | $106,800 |
| 1986 | $42,000 | 2011 | $106,800 |
| 1987 | $43,800 | 2012 | $110,100 |
| 1988 | $45,000 | 2013 | $113,700 |
| 1989 | $48,000 | 2014 | $117,000 |
| 1990 | $51,300 | 2015 | $118,500 |
| 1991 | $53,400 | 2016 | $118,500 |
| 1992 | $55,500 | 2017 | $127,200 |
| 1993 | $57,600 | 2018 | $128,400 |
| 1994 | $60,600 | 2019 | $132,900 |
| 1995 | $61,200 | 2020 | $137,700 |
| 1996 | $62,700 | 2021 | $142,800 |
| 1997 | $65,400 | 2022 | $147,000 |
| 1998 | $68,400 | 2023 | $160,200 |
| 1999 | $72,600 | 2024 | $168,600 |
Data source: Social Security Administration.
If you’re still working, it’s important to remember the earnings limits will continue to rise over time due to inflation. So if your salary isn’t keeping up with the earnings limits for at least 35 years, you won’t qualify for the maximum possible benefit in retirement.
There’s more to it than earning a high salary
As mentioned, there are a couple of other factors that go into calculating your monthly Social Security check.
First is when you were born. The $4,873 maximum monthly benefit in 2024 is only applicable for retirees turning 70 this year. That’s due to small changes in the benefits formula affected by when you were born.
Second is when you claim. You must wait until at least age 70 if you want to maximize your potential monthly benefit.
If you’re in line for the maximum possible Social Security benefit, that means you’ve earned a relatively high salary for at least 35 years. And if so, you might be accustomed to a lifestyle that requires more than the monthly $4,873. What’s more, you might not want to wait until age 70 to retire. As such, it’s important that you also save for retirement independently.
Regardless of your earnings history, building up your personal savings so you only rely on Social Security for supplemental income is the best way to ensure you can retire on your own terms and live the life you want in your golden years. The maximum benefit, if you qualify, could just be icing on the cake.