Social Security benefits are often the largest source of income for retired workers, so future retirees should target the biggest payout. The exact figure changes each year because the benefits formula is updated to account for changes in general wage levels. But the maximum benefit is $4,555 per month in 2023, up from $4,194 per month in 2022.
Future retirees hoping to get the biggest payout need to follow these three steps.
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Step 1: Spend at least 35 years in the workforce
Social Security typically replaces about 40% of preretirement income, but the exact benefit paid to a retired worker depends on two variables: lifetime wages and age. Specifically, the inflation-adjusted earnings from the 35 highest-paid years of a retired worker's career are run through a formula to calculate their primary insurance amount (PIA). The PIA is the benefit a retired worker would receive if they waited until full retirement age (FRA) to start Social Security.
Workers with less than 35 years in the workforce are at a distinct disadvantage, because zeroes are included in the calculation for each year they fall short of the threshold. For instance, an individual that spent 25 years in the workforce will take 10 zeroes in the PIA formula. That means the first step to attaining the maximum Social Security benefit is to spend at least 35 years in the workforce.
Step 2: Exceed the maximum taxable earnings limit for 35 years
Social Security is funded in large part by payroll taxes, but the amount of income subject to taxation is capped. The maximum taxable earnings limit is adjusted each year to keep pace with changes in general wage levels. The limit is $160,200 in 2023, up from $147,000 in 2022. Any income above that threshold is not taxed by the Social Security program, nor is it included in the PIA calculation.
That means income above the maximum taxable earnings limit has no impact on the benefit a retired worker receives. So the second step to attaining the biggest Social Security payout is to exceed the maximum taxable earnings limit for 35 years. That is easier said than done, though. Just six percent of workers make more money than the limit in any given year, according to the Social Security Administration (SSA). That means a very small fraction of the population is on track to get the maximum Social Security benefit.
Step 3: Delay Social Security benefits until age 70
Workers become eligible for Social Security retirement benefits at age 62. However, anyone who starts receiving Social Security before their FRA will receive a reduced portion of their PIA, and anyone who delays Social Security beyond FRA will receive an increased portion of their PIA, though the credit stops at age 70. For instance, a retired worker who starts benefits after reaching age 70 in 2023 would receive 132% of their PIA. Readers can use this calculator from the SSA to calculate the exact reduction or credit that would be applied to their Social Security check.
So the third step to getting the maximum retirement benefit is to wait until age 70 to start Social Security. In fact, most people would benefit from that advice, according to the National Bureau of Economic Research, but only about 10% of workers actually wait that long.
