Millions of seniors today receive a monthly benefit from Social Security. And while that benefit will ideally be just one of several sources of retirement income 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 entitled to 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. This is how you score an advantage so high.
Step 1: Work for a minimum of 35 years
The Social Security Administration takes your 35 highest paid years in the workforce into account in the calculation of your monthly benefit. To be eligible for $4,555 per month, you must have worked for 35 years, so you will not have any $0s in your benefit calculation for missing years.
Step 2: Earn an income equal to or greater than the salary cap
Did you know there is a salary cap when it comes to Social Security taxes? Workers only pay taxes on their earnings for Social Security purposes up to a certain point, and that level varies from year to year. In 2023, the salary cap is $160,200, so income above this threshold is not taxed. But to claim the maximum monthly Social Security benefit, your earnings must meet or exceed the salary cap for 35 years.
Step 3: Delay your Social Security claim until age 70
You are entitled to your full monthly benefit based on your earnings when you reach full retirement age, which is either 66, 67 or somewhere in between, depending on when you were born. Every year you delay applying after full retirement age, your benefits grow by 8%. To get the maximum monthly Social Security benefit, wait until age 70 to file.
Most seniors do not receive the maximum monthly benefit
Collecting $4,555 from Social Security each month during retirement may seem nice. But for most seniors, that’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 close to $4,555, but rather more in line with the current monthly average of $1,827, that doesn’t mean you’re doomed to a cash pension. Building yourself a solid nest egg is a great way to compensate for getting less income from Social Security. And even if you’ve pretty much missed the boat there, you’re not out of options.
Firstly, there is always part-time work on pension. And the gig economy makes it easy to earn an income at a pace that works well for you. You can also consider monetizing your home, whether it’s by renting out a finished basement or even a parking space in your driveway. There are many ways to generate retirement income outside of Social Security, so even if your monthly benefit isn’t as high as you’d like, all is far from lost.
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