Social Security isn’t designed to fully replace the income of the average worker, but it can still provide significant support. In July, the average benefit for a retired worker was $1,919.40, which, for many, isn’t enough to cover basic expenses, particularly as housing and medical costs continue to rise. However, it is possible to receive a much higher amount from Social Security—potentially even over $4,800 per month. The maximum benefit for retirees in 2024 is $4,873 per month, or $58,476 annually, which is comparable to the median income in the United States. This amount increases with yearly cost-of-living adjustments. While achieving this maximum benefit is difficult, it is possible if you meet specific criteria.
### Three Key Factors Impacting Social Security Benefits
There are three main factors that determine how much you’ll receive in Social Security benefits: your earnings history, when you were born, and the age at which you retire.
The first, and most important, factor is your earnings history. To be eligible for the maximum benefit, you need to have consistently earned a high salary throughout your career. The Social Security Administration (SSA) evaluates your earnings over your entire working life, adjusting for inflation, and selects your 35 highest-earning years. The average income from those 35 years is used to calculate your benefit. If you didn’t earn much or didn’t work for at least 35 years, this can significantly reduce your benefit, as the SSA averages zero-dollar years into your calculation.
The SSA then uses a benefits formula that takes into account your average earnings and your birth year to determine your primary insurance amount (PIA). This is the amount you will receive if you claim benefits at your full retirement age, which varies depending on when you were born. For those born between 1943 and 1954, the full retirement age is 66, and it gradually increases for those born later, maxing out at 67 for people born in 1960 or later.
The final factor is the age at which you retire. You can claim Social Security benefits as early as age 62, but your payments will be lower than your PIA. Conversely, if you delay claiming benefits beyond your full retirement age, your monthly benefit will increase until you reach age 70. For example, those with a full retirement age of 66 can receive a 32% increase in their PIA if they wait until 70 to begin collecting. However, there is no additional increase if you wait beyond age 70.
Maximizing Your Earnings History
Your earnings history is crucial for receiving the maximum benefit, but there’s an important detail to keep in mind: the SSA places a cap on the amount of income that is taxable for Social Security purposes. In 2024, the maximum taxable income is $168,600, which means only earnings up to this limit are considered when calculating Social Security taxes. The limit is adjusted yearly for wage inflation, so even if you earn more than the cap, only the amount up to the limit will be counted toward your benefits.
To be eligible for the maximum Social Security benefit, your income must meet or exceed the maximum taxable earnings limit for at least 35 years. If your earnings fall below the limit for even one year, it could reduce your benefit. The table below shows the maximum taxable earnings for Social Security over the past 50 years:
1975: $14,100
2000: $76,200
1976: $15,300
2001: $80,400
1977: $16,500
2002: $84,900
1978: $17,700
2003: $87,000
1979: $22,900
2004: $87,900
1980: $25,900
2005: $90,000
1981: $29,700
2006: $94,200
1982: $32,400
2007: $97,500
1983: $35,700
2008: $102,000
1984: $37,800
2009: $106,800
1985: $39,600
2010: $106,800
1986: $42,000
2011: $106,800
1987: $43,800
2012: $110,100
1988: $45,000
2013: $113,700
1989: $48,000
2014: $117,000
1990: $51,300
2015: $118,500
1991: $53,400
2016: $118,500
1992: $55,500
2017: $127,200
1993: $57,600
2018: $128,400
1994: $60,600
2019: $132,900
1995: $61,200
2020: $137,700
1996: $62,700
2021: $142,800
1997: $65,400
2022: $147,000
1998: $68,400
2023: $160,200
1999: $72,600
2024: $168,600
(Data from the Social Security Administration)
As these limits rise with inflation, your earnings need to keep up with them to maintain eligibility for the maximum benefit. If your salary falls short, it could reduce your overall retirement benefit.
Beyond Earnings: Timing and Birth Year Matter
While your earnings history plays the largest role, other factors influence how much you’ll receive from Social Security. For example, the $4,873 maximum monthly benefit for 2024 applies only to retirees who turn 70 this year. The benefit amount is slightly different depending on when you were born, reflecting changes in the benefits formula.
In addition, when you claim benefits is critical. To receive the highest possible monthly payout, you need to delay retirement until age 70. If you claim earlier, even by just a few months, your benefit will be reduced.
If you’re in line for the maximum possible benefit, it’s likely you’ve earned a relatively high salary for at least 35 years. However, if you’ve maintained a high income, you might also be accustomed to a lifestyle that requires more than $4,873 a month. Additionally, many people don’t want to wait until 70 to retire. In these cases, it’s essential to have personal savings to supplement your Social Security income.
Importance of Personal Savings
Regardless of your earnings history or the size of your Social Security benefit, relying solely on these payments is not advisable. Building up your personal savings throughout your career ensures that you won’t depend entirely on Social Security in retirement. The maximum benefit, if you qualify, can be a helpful supplement, but it shouldn’t be your primary source of retirement income.
As the article points out, “building up your personal savings so you only rely on Social Security for supplemental income is the best way to ensure you can retire on your own terms and live the life you want in your golden years.”
Don’t Overlook Potential Social Security Bonuses
If you’re like most Americans, it’s possible you’re behind on your retirement savings. However, several lesser-known strategies can help boost your Social Security benefits. For example, an easy trick could add up to $22,924 per year to your retirement income. Learning how to maximize your benefits can provide peace of mind and help you retire with confidence.
