In 2022, the top earning seniors rake in $4,194 per month in Social Security benefits, and they'll be sitting even prettier next year. The 2023 cost-of-living adjustment (COLA), which helps benefits keep pace with inflation, is the third-highest since 1980, at 8.7%. And that's sending the maximum Social Security benefit surging to a record high.
While all seniors on Social Security can expect an increase beginning in January, only an elite few will claim the top prize. Here's how to find out if you're one of them.
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Who earns Social Security's maximum benefit?
There are three criteria you need to meet in order to earn Social Security's maximum benefit in 2023. First, you need to work for at least 35 years before claiming. This is because the Social Security Administration bases your benefit on your average monthly earnings from your 35 highest-earning years, adjusted for inflation.
If you apply before you've worked this long, you'll have zero-income years factored into your calculation. Even one of these will automatically put the maximum monthly benefit beyond your reach.
Second, you have to pay Social Security payroll taxes on the maximum taxable income in your 35 highest-earning years. Not everyone knows this, but the government doesn't collect Social Security taxes on all income. In 2022, only the first $147,000 is subject to these taxes, and in 2023, that number will rise to $160,200. But in prior years, it was lower.
This is why most people aren't able to claim the top benefit. Few people manage to pull in that much money throughout their careers, let alone do it in 35 separate years.
The final step to claim the maximum benefit is to delay benefits until 70. While it's possible to claim checks as early as 62, many don't realize that doing so shrinks your benefit. Your checks increase a little for every month you delay benefits until you reach the maximum benefit at 70.
Those lucky few who meet all three criteria in 2023 will bring home $4,555 monthly checks. That adds up to an annual benefit of $54,660.
What if you can't claim the maximum Social Security benefit?
Most people won't take home quite this much, but don't let that discourage you. You can still use this information to squeeze as much out of the program as possible.
Perhaps the easiest way to increase your benefit is to continue working. Being employed for at least 35 years will help you avoid zero-income years in your benefit calculation, and working even longer could boost your benefit over time. Most people earn more later in their careers than they did when they were just starting out. Once they pass the 35-year mark, these later, higher-earning years replace their earlier, lower-earning years in their benefit calculation.
Taking steps to increase your income can also help boost your Social Security checks. Plus, they'll give you more money to spend today. You could work overtime, find a better-paying job, or start a side hustle to give you a few ideas.
As for delaying until 70, this could be a smart decision if you can afford to fund retirement on your own until then and expect to live into your 80s or beyond. But claiming early could be a wiser choice if you're already retired and struggling financially, or you don't expect to live long.
You could also claim benefits at your full retirement age (FRA) as a middle ground. This is anywhere from 66 to 67, depending on your birth year. If you claim at this age, you get the full benefit you've earned based on your work history, with no adjustments up or down for early or delayed claiming.
Think through all your options, and choose a tentative claiming age for now. You can always adjust this over time if your retirement goals or time line change.
