Learn How to Get the Most out of Social Security

Having a well-thought-out financial plan leading up to retirement is crucial to avoid financial stress during this time. For many Americans, Social Security forms a significant part of their retirement income. Whether Social Security plays a central role or not, individuals often wonder if they can maximize their benefits. In 2024, the maximum Social Security benefit is set at $4,739, a figure that is feasible to achieve with the right approach.

To calculate your monthly Social Security benefit, the program considers your average income during the 35 years when you earned the most. However, not all income is included in this calculation. Benefits are only calculated based on income up to the wage base limit.

Using inflation-adjusted wage base limits, Social Security taxes are imposed on a maximum amount of income each year. In 2024, the wage base limit increases to $168,600 from the 2024 limit of $160,200. This means that any income earned beyond $168,600 will not be taxed at the Social Security rate of 12.4% (if you are not self-employed, your employer pays half).

To receive the maximum monthly benefit of $4,739, your income in the 35 years used in the Social Security calculations must match or exceed the wage base limit for each of those years. For instance, if the past five years are considered, your income must have been at least:

  • 2024: $160,200
  • 2024: $147,000
  • 2021: $142,800
  • 2020: $137,700
  • 2019: $132,900

Earning the inflation-adjusted equivalent of $168,600 for at least 35 years is necessary to qualify for the maximum benefit since the wage base limit is adjusted annually.

While your earnings are important, they are only one aspect of the equation. The other half is when you choose to claim your benefits. Your full retirement age, based on your birth year, plays a significant role in determining your Social Security benefit. This age represents when you are eligible to receive the full monthly benefit. If you claim your benefits prior to full retirement age, they will be reduced. In contrast, delaying benefits beyond your full retirement age will increase your monthly benefit.

In order to get the maximum Social Security benefit, you must meet the income requirement and delay claiming benefits until age 70. It is essential to fulfill both criteria; simply meeting the income requirement or delaying the benefit claim alone will not suffice.

To estimate your Social Security benefit, you can check your earnings record at any time through the Social Security website (SSA.gov). Creating an account allows you to view your annual earnings record and projected benefits. In most cases, the projected benefit will be below the maximum possible, considering only around 6% of people earn above the wage base limit each year, and even fewer do so consistently for 35 years.

While aiming for the maximum benefit is admirable, it is important to view Social Security as one component of your overall retirement income rather than relying solely on it. When you utilize retirement accounts such as 401(k)s and IRAs, you can reduce the financial burden of retirement, allowing you to enjoy this stage of your life to the fullest.