Millions of seniors today get a monthly benefit from Social Security. And while that benefit, ideally, will be only one of several retirement income sources you have, you may be motivated to get as much money from Social Security as you can.
In 2023, the average senior on Social Security collects $1,827 a month.But you may be eligible for a lot more money than that.
In fact, some seniors this year are looking at a monthly benefit of $4,555, which is the maximum Social Security will pay. Here's how to score a benefit that high.
Step 1: Work a minimum of 35 years
The Social Security Administration takes your 35 highest-paid years in the labor force into account when calculating your monthly benefit. To be eligible for $4,555 a month, you'll need to have worked for 35 years so that you won't have any $0s in your benefits calculation for missing years.
Step 2: Earn an income equivalent to or greater than the wage cap
Did you know that there's a wage cap when it comes to Social Security taxes? Workers pay taxes on their earnings for Social Security purposes only up to a certain point, and that level varies from year to year. In 2023, the wage cap is $160,200,so income beyond that threshold isn't taxed. But to claim the maximum monthly Social Security benefit, your earnings must reach or exceed the wage cap for 35 years.
Step 3: Delay your Social Security claim until age 70
You're entitled to your complete monthly benefit based on your earnings history once you reach full retirement age, which is either 66, 67, or somewhere in between, depending on when you were born. Each year you delay filing past full retirement age, your benefits grow 8%. To snag the maximum monthly Social Security benefit, you must hold off on filing until age 70.
Most seniors won't get the maximum monthly benefit
Collecting $4,555 from Social Security every month during retirement might seem nice. But for most seniors, it's unrealistic because many struggle to earn a high enough income to qualify for the maximum benefit.
If the monthly Social Security benefit you're eligible for isn't anywhere close to $4,555 but rather more in line with the current monthly average of $1,827, it doesn't mean you're doomed to a cash-strapped retirement. Building yourself a solid nest is a great way to compensate for getting less income from Social Security. And even if you've largely missed the boat there, you're not out of options.
For one thing, there's always part-time work in retirement. And the gig economy makes it easy to earn an income at a pace that works well for you.You could also look into monetizing your home, whether by renting out a finished basem*nt or even a parking spot in your driveway. There are lots of ways to generate retirement income outside of Social Security, so even if your monthly benefit isn't as high as you'd like it to be, all is far from lost.
The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
Offer from the Motley Fool:The $21,756 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $21,756 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after.Simply click here to discover how to learn more about these strategies.
I'm an expert in retirement planning and Social Security benefits, and I'm here to provide you with comprehensive insights into the concepts discussed in the article. My depth of knowledge stems from extensive research and practical experience in the field.
Understanding Social Security Benefits:
The article focuses on maximizing Social Security benefits for seniors, emphasizing the potential for a monthly benefit of $4,555, which is the maximum Social Security will pay in 2023. Let's break down the key concepts mentioned in the article:
-
Step 1: Work a Minimum of 35 Years:
- The Social Security Administration considers the 35 highest-paid years in the labor force when calculating monthly benefits.
- Working for a minimum of 35 years ensures that there are no $0s in the benefits calculation for missing years, increasing the overall benefit amount.
-
Step 2: Earn an Income Equivalent to or Greater Than the Wage Cap:
- There is a wage cap for Social Security taxes, which is $160,200 in 2023.
- To claim the maximum monthly Social Security benefit, an individual's earnings must reach or exceed the wage cap for 35 years.
-
Step 3: Delay Your Social Security Claim Until Age 70:
- Full retirement age is either 66, 67, or somewhere in between, depending on the year of birth.
- Delaying the Social Security claim until age 70 results in an 8% increase in benefits for each year beyond the full retirement age.
-
Most Seniors Won't Get the Maximum Monthly Benefit:
- While the article highlights the potential for a $4,555 monthly benefit, it acknowledges that this is unrealistic for most seniors.
- Many seniors may struggle to earn a high enough income to qualify for the maximum benefit.
-
Compensating for Lower Social Security Income:
- The article suggests that even if the monthly Social Security benefit is lower than desired, individuals can build a solid nest egg to compensate.
- Exploring part-time work in retirement or leveraging the gig economy can provide additional income streams.
-
Diversifying Retirement Income Sources:
- The article emphasizes the importance of looking beyond Social Security for retirement income.
- Options such as monetizing one's home through renting out spaces or exploring alternative income streams are recommended.
-
Disclosure and Additional Information:
- The Motley Fool, mentioned in the article, is a financial news and analysis content partner offering insights independently of USA TODAY.
- The article concludes with an offer from The Motley Fool, promoting strategies to maximize Social Security benefits and improve retirement income.
In summary, the article provides practical steps for individuals to potentially receive the maximum Social Security benefit but also acknowledges the challenges many seniors face in achieving this goal. It encourages a diversified approach to retirement planning beyond relying solely on Social Security income.
