Social Security is an essential source of income for millions of retirees, providing guaranteed income when every dollar counts. Retirement is the time for you to reap the benefits from Uncle Sam after years of paying Social Security taxes.
The amount of monthly Social Security benefits you'll receive will vary widely, but many people set out to receive the maximum amount possible. In 2024, the maximum Social Security benefit is $4,873 per month, a significant amount that could enhance your quality of life in retirement. If you're aiming for the maximum payout, you must do the following two things.
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1. Earn above the wage base limit for 35 years
Social Security calculates your monthly benefit using your average earnings during the 35 years when your income was the highest. It adjusts your earnings for inflation (called "indexing") and then divides the total number of months in those 35 years to get your average indexed monthly earnings (AIME).
However, only income up to a certain amount -- the "wage base limit" -- is taxed annually and considered in those calculations. The wage base limit in 2024 is $168,600 but is adjusted for inflation yearly, so it's important to stay up to date on the current year's amount. In some cases, someone might be above it in a given year and below it the next year because of the adjustment.
Here are the wage base limits for the previous five years:
| Year | Wage Base Limit |
|---|---|
| 2023 | $160,200 |
| 2022 | $147,000 |
| 2021 | $142,800 |
| 2020 | $137,700 |
| 2019 | $132,900 |
Source: Social Security Administration
To receive the maximum $4,873 monthly Social Security retirement benefit, you must earn at least the wage base limit for all of the 35 years that Social Security uses to calculate your benefit. Earning below the wage base limit in any of those 35 years would automatically disqualify you from receiving the maximum benefit.
2. Don't claim benefits until age 70
Your full retirement age (FRA) is when you're eligible to receive your primary insurance amount (PIA), which you can think of as your baseline monthly benefit. However, you can claim before or after your FRA, which will respectively decrease or increase your benefit. Here are FRAs by birth year:
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Delaying benefits past your FRA will increase them by 2/3 of 1% each month until you turn 70. This works out to 8% annually and 24% if your FRA is 67 and you delay benefits until 70.
To receive the maximum Social Security retirement benefit, you must earn above the wage base limit for 35 years and delay benefits until you turn 70. Doing one without the other would eliminate the chance of receiving the maximum benefit.
Your earnings record will let you know if you're on track for the maximum
Most people can't keep up with a lifetime's worth of earnings and remember if they've earned above the wage limit for a given year. Luckily, you don't have to because Social Security makes your earnings record easily accessible on their website (SSA.gov). Your earnings record will show the income history that Social Security has on file and an estimate of your future benefits based on whether you claim early, at your FRA, or delay past then.
While receiving the maximum payout sounds enticing, the reality is that most people won't come close to it. Delaying benefits is fairly easy, but the earnings requirement is where most people come up short. The Social Security Administration says that only around 6% of people earn above the wage base limit in a given year, so you can imagine far fewer do so for all 35 years.
Regardless of whether you qualify for the maximum benefit, Social Security should ideally complement your other retirement income sources, rather than be your sole support. Taking a proactive approach to retirement savings can help secure a more comfortable and financially stable retirement.
