There is a maximum Social Security benefit seniors can receive. In 2022, it's $4,194. This generous retirement benefit is available to people who earned the highest possible average wage and wait as long as possible to claim Social Security benefits.
So what is the highest possible average wage, and what salary would you need in order to hit this target? Here's what you need to know.
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This is the salary needed to max out your Social Security checks
In 2022, you would need to earn $147,000 to be on track for the maximum Social Security benefit of $4,194. Here's why.
As mentioned, Social Security benefits are based on average wages. Your average wage is calculated by:
- Adjusting all of your wages over your career to account for wage growth.
- Adding up the wages you earned during the 35 years when your earnings were highest.
- Calculating your monthly average wage over the 420 months included in your benefits calculation.
You get benefits equaling a percentage of this average wage, which is called your Average Indexed Monthly Earnings, or AIME. But there's a catch.
Social Security sets a limit on how much money is included in the benefits calculation. It's called the Wage Base Limit. If you earn above this amount, you won't pay Social Security taxes on any extra earnings, and the extra money won't be part of the calculation of your average wage. The wage base limit is the reason why there's a maximum average wage in the first place, and thus the reason why there's a maximum Social Security benefit.
If you earn the wage base limit (or more) for every one of your 35 years included in your average wage calculation, you'll have the highest average wage possible, so you'll have the highest standard Social Security benefit possible. You'll still need to wait until the age of 70 to claim your benefits, though, because you can earn delayed retirement credits until that age. You'll need to max those out to increase your standard benefit as much as possible in order to get the absolute maximum Social Security payment.
The wage base limit also changes over time. In 2023, for example, it will be $160,200, so you'd need to earn that much next year to be on track to max out Social Security benefits in the future. Every single year for at least 35 years, you'd need to earn the inflation-adjusted equivalent of this amount.
What if your salary is below $147,000?
If your salary is below $147,000 in 2022 or below $160,200 in 2023, you could potentially still earn the maximum Social Security benefit. But to do so, you would need to make sure that 2022 (or 2023) doesn't count in your benefits calculation. You would need a total of 35 other years of work, during which you earn the maximum countable income.
Most people are not going to be able to pull that off, so don't count on maxing out your Social Security benefit. Instead, you should realize your own Social Security is going to equal about 40% of your preretirement wages. So you can estimate what your benefit is likely to be and start planning to save enough to supplement that income so you can have a comfortable life as a retiree.
