Social Security represents a vital financial backstop for aging Americans. Most retirees rely on it for the majority of their financial support in retirement, and a surprisingly large number of Americans get nearly all of their retirement income from the program.
A typical recipient got a $1,543 monthly check when 2021 began. But much larger Social Security payments are possible if you do everything you can to maximize your benefit. In fact, if you play your cards right and are fortunate enough to qualify, it's entirely possible that the maximum Social Security benefit will jump to more than $4,000 a month starting in 2022.
Below, we'll look at what it takes to earn that maximum benefit and what you can do to boost your prospects for more money from Social Security.
The 3-step process for making the most of Social Security
The Social Security Administration (SSA) calculates your benefit based on your average earnings over the course of your career. It assumes that a typical career lasts 35 years, and so it takes your 35 highest-earning years after adjusting for wage inflation. Only earnings up to the annual wage base limit count toward your Social Security calculation, so a big blowout year won't necessarily have the impact you'd expect.
The SSA also looks at when you claim Social Security benefits. You're entitled to start receiving monthly checks as early as age 62, but if you do, you'll have to accept a smaller benefit. Conversely, waiting past full retirement age -- which ranges between 66 and 67, depending on your birth year -- will get you delayed retirement credits that will boost your monthly check.
Put all that together, and there are three things you have to do to max out your Social Security benefit:
- Work for at least 35 years.
- Earn at least the maximum wage base amount in those 35 years.
- Don't claim your benefits until you turn 70, the age at which delayed retirement credits stop accruing.
Why the maximum keeps going up
If you followed that strategy and retired at age 70 in 2021, then you would've qualified to receive this year's maximum Social Security benefit of $3,895 per month. That adds up to $46,740 in annual benefits -- quite a bit more than the roughly $18,500 that the typical Social Security recipient receives.
But the maximum amount Social Security pays tends to go up from year to year. That's largely because the annual wage base limit usually rises from one year to the next, and so the maximum possible average monthly earnings over a 35-year career are higher. For instance, the maximum benefit jumped $105 in 2021 from 2020's figure of $3,790 per month. It was only in 2009 that the maximum topped the $3,000 mark for the first time.
If anything, it seems likely that 2022's wage base limit could rise even more than usual. Wage pressures are affecting employment, with many jobs going unfilled due to pay that's perceived to be too low. All it would take is a move higher that's similar to 2021's for the 2022 maximum Social Security benefit figure to reach $4,000 a month for the first time ever.
Get as much as you can from Social Security
Obviously, many people will have earnings that are far less than the Social Security wage base limit, while others won't work a full 35 years. Yet even though the maximum Social Security benefit might be out of reach in those situations, you can still do what you can to boost your earnings and time your Social Security benefits to get the biggest monthly payment you can. The steps you take will play a big role in how secure your retirement is financially.