What’s the maximum social security benefit?

If you are more than a few years from retirement, you may want to know how much you will receive from Social Security. While your earnings history plays an important role in determining how much you receive, the maximum benefits you would receive depend on the age when you claim Social Security benefits.

The maximum Social Security benefit at the full retirement age is $3,345 per month in 2022. If you wait until age 70 to collect Social Security payments, the maximum benefit you will receive is $4,194 per month. However, if you decide to claim Social Security at 62, the maximum benefits you will receive is $2,364 per month.

How to qualify for Social Security benefits

Social Security benefits are available to employees working in a job covered by Social Security. If you have been paying into Social Security, you qualify to collect Social Security checks if you have at least 40 work credits. In 2022, $1,510 in earnings represent one work credit, and you can earn up to four credits in a year.

Additionally, the Social Security Administration (SSA) uses 35 best-paid years of your career to determine your average indexed monthly earnings (AIME). If you did not work for the required 35 years, SSA adds zeros in the years with no earnings, and this could lower your Social Security payments. If you worked for more than 35 years, SSA uses the highest-earning years to replace the years with low earnings.

Also, you must meet the minimum age for Social Security. You can collect Social Security at age 62, but you will receive reduced benefits than if you waited until the full retirement age. The full retirement age starts at 66 (people born from 1943 to 1953), and it gradually increases to 67 for people born in 1960 for later.

How to qualify for the maximum Social Security Payment

Here are things you can do to qualify for the maximum benefit:

Claim Social Security benefits at 70

If you delay collecting Social Security checks beyond the full retirement age, your benefits will increase by 8% yearly until you reach 70. If your full retirement age is 66, your Social Security payments will increase to 132% by age 70. The maximum benefit that you can get at age 70 is $4,194 each month in 2022.

Earn a consistently high salary

Earning a higher salary throughout your career can help you qualify for the maximum Social Security payments. You can boost your income by earning income from a second job or moving to a higher-paying job to set you for higher benefits in retirement.

For 2022, the maximum taxable earnings for Social Security is $147,000. Any earnings above $147,000 are not subject to Social Security taxes and will, therefore, not be considered when determining your Social Security payments. The maximum earnings taxable by Social Security are adjusted for inflation annually.

You need at least the maximum taxable earnings for 35 years to get the maximum benefit. If you have years with zero or low earnings, they could lower your overall Social Security earnings when you retire.

Work at least 35 years

SSA takes your 35 highest paid inflation-adjusted earnings and averages them together. If you worked more than 35 years, the higher-earning years will cancel the lower-earning years in the calculation.

However, if you have less than 35 years of work in Social Security-covered employment, zeros will be used for the years with no earnings. You can boost your Social Security payments even after retirement if your job pays you more than what you earned earlier in your career.

What is the average Social Security benefit?

As of June 2022, the average Social Security benefit is $1,542 per month. The monthly Social Security checks vary across recipients. Typically, Social Security is designed to provide a payment that replaces about 40% of the beneficiary's pre-retirement income.

You can get an estimate of your Social Security benefit by logging in to your My Social Security account and checking the most recent statement. You will see an estimate of the benefit you will receive if you claim benefits early, at your full retirement age, or late, based on your work record.

How Social Security Benefits are calculated

SSA uses a three-step process to calculate Social Security benefits. Follow these steps to estimate the benefits you will receive:

Calculate AIME

Social Security adjusts historical earnings for inflation and uses the 35 highest earning years to calculate your Average Indexed Monthly Earnings (AIME). Usually, only the maximum taxable earnings are counted. Excess earnings above the maximum taxable amount are excluded and, therefore, do not affect the Social Security payments.

Calculate PIA

SSA uses AIME to determine your Primary Insurance Amount (PIA). PIA represents the full monthly benefit at the full retirement age. Here is the formula for calculating PIA

90% of the first $1,024 of AIME

32% of any amount over $1,024 up to $6,172.

15% of any amount above $6,172

The sum of these figures is the PIA, which is your benefits payment at your full retirement age

Adjust PIA based on age

SSA adjusts the benefits depending on the age when you claim the benefit. If you collect Social Security checks before the full retirement age, you will receive reduced benefits. If you delay taking benefits after the full retirement age, SSA adds to your benefits for each month you delay taking benefits until age 70. You gain 8% for each year you delay benefits until 70.