Millions of seniors today get a monthly benefit from Social Security. And while that benefit, ideally, will be only one of several retirement income sources 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 eligible for 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. Here's how to score a benefit that high.
Step 1: Work a minimum of 35 years
The Social Security Administration takes your 35 highest-paid years in the labor force into account when calculating your monthly benefit. To be eligible for $4,555 a month, you'll need to have worked for 35 years so that you won't have any $0s in your benefits calculation for missing years.
Step 2: Earn an income equivalent to or greater than the wage cap
Did you know that there's a wage cap when it comes to Social Security taxes? Workers pay taxes on their earnings for Social Security purposes only up to a certain point, and that level varies from year to year. In 2023, the wage cap is $160,200,so income beyond that threshold isn't taxed. But to claim the maximum monthly Social Security benefit, your earnings must reach or exceed the wage cap for 35 years.
Step 3: Delay your Social Security claim until age 70
You're entitled to your complete monthly benefit based on your earnings history once you reach full retirement age, which is either 66, 67, or somewhere in between, depending on when you were born. Each year you delay filing past full retirement age, your benefits grow 8%. To snag the maximum monthly Social Security benefit, you must hold off on filing until age 70.
Most seniors won't get the maximum monthly benefit
Collecting $4,555 from Social Security every month during retirement might seem nice. But for most seniors, it'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 anywhere close to $4,555 but rather more in line with the current monthly average of $1,827, it doesn't mean you're doomed to a cash-strapped retirement. Building yourself a solid nest is a great way to compensate for getting less income from Social Security. And even if you've largely missed the boat there, you're not out of options.
For one thing, there's always part-time work in retirement. And the gig economy makes it easy to earn an income at a pace that works well for you.You could also look into monetizing your home, whether by renting out a finished basem*nt or even a parking spot in your driveway. There are lots of ways to generate retirement income outside of Social Security, so even if your monthly benefit isn't as high as you'd like it to be, all is far from lost.
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Now, let's break down the key concepts discussed in the provided article:
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Monthly Social Security Benefits:
- The article mentions that the average senior on Social Security in 2023 receives $1,827 per month.
- However, some seniors can potentially receive the maximum monthly benefit of $4,555.
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Factors Affecting Social Security Benefits:
- Step 1: Work a minimum of 35 years:
- The Social Security Administration considers the 35 highest-paid years when calculating monthly benefits.
- Working for 35 years ensures there are no $0 years in the benefits calculation.
- Step 2: Earn income equal to or exceeding the wage cap:
- There is a wage cap for Social Security taxes, set at $160,200 in 2023.
- To claim the maximum benefit, one must earn at or above the wage cap for 35 years.
- Step 3: Delay claiming Social Security until age 70:
- Full retirement age is either 66, 67, or somewhere in between, depending on birth year.
- Benefits increase by 8% for each year Social Security filing is delayed past full retirement age, up to age 70.
- Step 1: Work a minimum of 35 years:
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Challenges in Achieving Maximum Benefits:
- The article acknowledges that most seniors won't attain the maximum monthly benefit due to challenges in earning a high enough income.
- The realistic average monthly benefit is stated to be $1,827.
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Alternative Retirement Income Strategies:
- Building a solid nest egg is recommended as a way to compensate for a lower Social Security income.
- Part-time work in retirement and opportunities in the gig economy are suggested for additional income.
- Monetizing assets, such as renting out a finished basem*nt or parking spot, is proposed as an option.
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Additional Financial Advice:
- The Motley Fool, a financial news and analysis platform, is mentioned as a source offering insights and commentary to help individuals take control of their financial lives.
- The article concludes with a disclosure policy and an offer from The Motley Fool, highlighting potential Social Security strategies to boost retirement income.
In summary, the article provides a comprehensive guide on maximizing Social Security benefits, acknowledges the challenges many seniors face, and suggests alternative strategies to enhance retirement income beyond Social Security.
