The formula is straightforward, but it's not that easy to accomplish.
Your monthly Social Security benefit in retirement is heavily dependent on you. Your career choices and how you plan for retirement will have a major impact on how much you receive from the government program when you make your claim.
It's possible to collect up to $4,555 per month from Social Security in 2023. That maximum will increase to $4,873 in 2024.
If you want to receive that much, there are three steps to get there.
Image source: Getty Images.
Step 1: Work at least 35 years
When the Social Security Administration calculates your retirement benefit, it uses the average of your 35 highest-earning years, adjusted for inflation. If you work less than 35 years, it'll fill in those missing years with zeros, bringing your average down.
Most Americans will end up working 35 years. Even someone who doesn't start their career until their late 20s or early 30s (like a medical doctor) is still likely to work 35 years.
If you work into your 60s, you have a greater chance of maximizing your Social Security. That's because the Social Security Administration stops adjusting your previous earnings for inflation once you reach 60. On top of that, your earnings power is usually higher in your 60s than in your 20s, so you'll likely see an increase to your Social Security benefit even if you've already worked 35 years by the time you reach 61.
Step 2: Earn the maximum taxable amount each year
If you want the maximum Social Security retirement benefit, you have to pay the maximum Social Security tax for at least 35 years.
Social Security taxes only apply to applicable wages earned up to a certain value each year. Every year, that number is adjusted for inflation. For 2023, the amount is $160,200. Any amount earned above that is exempt from Social Security taxes. Next year, the cap will rise to $168,600.
Here's a table showing the earnings threshold for the last 50 years.
| Year | Earnings | Year | Earnings |
|---|---|---|---|
| 1973 | $10,800 | 1999 | $72,600 |
| 1974 | $13,200 | 2000 | $76,200 |
| 1975 | $14,100 | 2001 | $80,400 |
| 1976 | $15,300 | 2002 | $84,900 |
| 1977 | $16,500 | 2003 | $87,000 |
| 1978 | $17,700 | 2004 | $87,900 |
| 1979 | $22,900 | 2005 | $90,000 |
| 1980 | $25,900 | 2006 | $94,200 |
| 1981 | $29,700 | 2007 | $97,500 |
| 1982 | $32,400 | 2008 | $102,000 |
| 1983 | $35,700 | 2009 | $106,800 |
| 1984 | $37,800 | 2010 | $106,800 |
| 1985 | $39,600 | 2011 | $106,800 |
| 1986 | $42,000 | 2012 | $110,100 |
| 1987 | $43,800 | 2013 | $113,700 |
| 1988 | $45,000 | 2014 | $117,000 |
| 1989 | $48,000 | 2015 | $118,500 |
| 1990 | $51,300 | 2016 | $118,500 |
| 1991 | $53,400 | 2017 | $127,200 |
| 1992 | $55,500 | 2018 | $128,400 |
| 1993 | $57,600 | 2019 | $132,900 |
| 1994 | $60,600 | 2020 | $137,700 |
| 1995 | $61,200 | 2021 | $142,800 |
| 1996 | $62,700 | 2022 | $147,000 |
| 1997 | $65,400 | 2023 | $160,200 |
| 1998 | $68,400 | 2024 | $168,600 |
Data source: Social Security Administration.
Remember, this only applies to wages subject to Social Security taxation. Income earned from investments or from work not subject to Social Security (like a government job) won't count.
Step 3: Wait until age 70 to claim Social Security
Once you've finished your high-paying career, the only thing left to do is wait until 70 to claim Social Security.
While you become eligible for benefits at age 62, waiting until 70 will earn you delayed retirement credits. For each year you delay beyond your full retirement age, you'll increase your benefit by 8 percentage points.
Someone born in 1953 turned 70 this year, but had a full retirement age of 66. As a result, if they claim Social Security benefits this year, they'll receive 32% more than if they claimed at their full retirement age of 66.
Two important things to note. First, the full retirement age is increasing. Those born in 1960 or later have a full retirement age of 67. Therefore, the maximum they can receive in delayed retirement credits is a 24% bump. Those born between 1955 and 1959 have a full retirement age between 66 and 67.
The second thing to note is that you stop receiving delayed retirement credits after age 70. Therefore, there's typically no point in delaying past age 70, when you'll max out your retirement benefit.
Focus on what you can control
You have a lot of control over what you'll ultimately receive from Social Security in retirement. If you focus on working in a high-paying career for a long time and position yourself to delay Social Security until 70, you're doing everything you can to maximize your benefit.
Unfortunately, you can't control everything. A pressing matter in our government is the state of the Social Security Trust Fund. The trust is set to exhaust its cash reserves by 2034, according to the most recent Trustee's Report.
If Congress cannot find a suitable solution, the Social Security Administration may need to cut benefits by 23% in order to sustain the program through the end of the century. Some members of Congress want to cut benefits now to mitigate the negative impact in the future. Others want to raise taxes in an effort to increase funding for Social Security and maintain benefits.
While you can vote for your representative to fight for Social Security, and you should, most of your focus should go toward the things you can control to maximize your benefit.
