In 2021, you had to earn $142,800 to earn the maximum taxable wage that would put you on the path toward maxing out Social Security. The “wage base limit” is set each year, adjusting upward to account for inflation. It’s a specific income threshold above which income isn’t taxed and isn’t included in your benefits formula. To earn a $4,194 Social Security check, your earnings must equal or exceed the wage base limit for a minimum of 35 years so you can get the highest average wage. Income up to a “wage base limit” counts when average wages are determined. When the amount of your Social Security benefit is calculated, it’s based on average wages — after adjusting for inflation — in the 35 years you earned the most.

  • To estimate your Social Security benefits, the 35 years you made the most money are added together.
  • If you can’t afford to delay Social Security until you’re 70 (or you simply don’t want to wait that long), you won’t be eligible for the maximum benefit.
  • Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer.
  • You will need to maintain a high income throughout your career to qualify for large Social Security payments in retirement.
  • Are you wondering if you have a shot at claiming Social Security’s largest benefit?

You can start claiming at age 62, but this would result in a permanent 30% reduction of your benefits. Read on to see the maximum Social Security benefit in 2024, and to learn the salary retired workers need to qualify for the biggest payout. One decision many older Americans struggle with is when to file for Social Security. If you claim benefits too early, you might reduce them on a permanent basis. But if you wait too long to sign up for benefits, you’ll risk getting less money in your lifetime if you wind up passing away at a young age.

What Is Social Security Full Retirement Age?

But you’re not entitled to your full monthly benefit — the one that’s calculated based on your earnings history — until you reach full retirement age, or FRA. Social Security is financed by a 12.4 percent payroll tax on wages up to the taxable earnings cap, with half (6.2 percent) paid by workers and the other half paid by employers. Once all wages have been indexed, your average indexed monthly earnings (AIME) are computed by dividing the sum of all indexed wages by 420 (35 years expressed as months). If you worked fewer than 35 years, a zero is entered for years when you did not work.

The average Social Security retirement benefit is significantly lower than the maximum. It was $1,628.17 per month in September 2022, according to the most recent data available from the SSA. Keep in mind that Social Security benefits were designed so that you should, in theory, receive the same amount over a lifetime regardless of what age you claim.

How to Get the Maximum Social Security Benefit You’ve Earned

Most people, realistically, don’t have 35 years of maximum taxable earnings so probably won’t get the highest benefit available. If you earn less than $147,000 in 2022, you could still potentially max out your Social Security checks if you work for more than 35 years. But this will work only if your income equals or exceeds the wage base limit in all of the years included in your average wage. If you worked for 36 years, for example, you could push out 2022 so it doesn’t count — but you’d have to earn the maximum taxable income for all of your other working years.

Maximum Social Security Benefit 2023

The existence of a fiduciary duty does not prevent the rise of potential conflicts of interest. Lastly, workers for a foreign government may be exempt under certain circumstances. If you believe you may fall into one of these groups, consult your tax advisor. The Sun also reveals the four things to know about Social Security tax and the five things you need to do before claiming it.

Each year, Social Security imposes what’s known as an earnings test for workers who earn money from a job but also collect benefits. Income that exceeds the earnings test limit could result in withheld benefits, so it’s important to know what those thresholds look like. In 2022, the maximum amount you can earn while collecting Social Security is $19,560 if you are collecting benefits and under your full retirement age (see how benefits are calculated).

History of Automatic Cost-Of-Living Adjustments

This number is similar to the percentage of retirees last year who waited until age 70 or later to receive retirement benefits. The Social Security portion is taxed at 6.2% on earnings up to the maximum taxable amount, while the Medicare portion is taxed at 1.45%. In total, the combined rate is 7.65% up to maximum taxable amounts, with the maximum total taxable income amount having increased again in 2023. As shown above, claiming age has a substantial impact on retirement benefits.

Congress enacted the COLA provision as part of the 1972 Social Security Amendments, and automatic annual COLAs began in 1975. Before that, benefits were increased only when Congress enacted special legislation. This is a secure, convenient way to receive COLA notices online and save the message for later. You can also opt out of receiving notices by mail that are available online.

Receiving Benefits While Working

To receive the maximum Social Security benefit, you would need to earn at least the maximum wage taxable by Social Security for 35 years and delay claiming the benefit until you reach 70. The earnings cap adjusts every year based on changes to the national average wage index and is $160,200 in 2023, up from $147,000 in 2022. The maximum Social Security benefit is calculated based on your average indexed monthly earnings (AIME) and the primary insurance amount (PIA). Your highest 35 years of earnings are indexed to the current wage base in order to calculate your AIME, then your PIA is calculated based on a formula set by law. The maximum benefit is calculated by applying the bend points of the PIA formula. The maximum social security benefit is for individuals who, for at least 35 years of working, had earnings equal to or greater than Social Security’s maximum taxable income.