It takes a long career earning a high salary to achieve the maximum Social Security benefit.
Few people can expect to retire on Social Security alone. The average Social Security retirement benefit in May was $1,868. That’s just $22,416 on an annual basis. Without any extra sources of income, you’ll probably find your retirement lacking.
If you earn enough during your career, however, you could receive a much larger monthly check. The maximum benefit in 2024 is $4,873 per month, the equivalent of $58,476 per year. And that amount gets an inflation adjustment every year. That might be enough to provide for a healthy and happy retirement.
But the requirements are tough, and only a minuscule percentage of Americans will qualify for the maximum benefit each year. Here’s how to position yourself to be one of the select few.
Image source: Getty Images.
How the government calculates your Social Security benefits
Before we get to the salary requirements for the maximum Social Security benefit, it’s important to understand the factors that determine how much you’ll receive every month. There are only three factors.
- Your earnings history
- Your full retirement age
- The age you apply for Social Security
It’s not enough to earn a high salary in one year. The way the Social Security Administration calculates your benefit is based on your entire earnings history. It takes every year you earned income and adjusts the amount earned for wage inflation. It then selects the 35 highest-earning years and averages them to determine your average indexed monthly earnings, or AIME.
The next step is to take your AIME and plug it into the Social Security benefits formula, which will produce out your primary insurance amount, or PIA. That’s the amount you’ll receive if you apply for benefits at your full retirement age.
Full retirement age is based on when you were born. Those born between 1943 and 1954 reached full retirement at 66. The age increases by 2 months for each year you were born after 1954 before maxing out at age 67 for anyone born in 1960 or later.
You can apply for Social Security retirement benefits starting at age 62. But if you apply before you reach your full retirement age, you’ll receive a monthly benefit that’s only a fraction of your PIA. On the other hand, if you delay benefits, you’ll accrue delayed retirement credits. The government will increase your benefit by 2/3 of a percentage point for each month you delay your application up to age 70. So, someone with a full retirement age of 66 could receive a 32% boost from their PIA by waiting until 70 (or later) to claim benefits.
The salary you need to maximize Social Security
As mentioned, the Social Security Administration will average your 35 highest-earning years of your career to calculate your monthly retirement benefit. But not every penny you earn from work counts toward Social Security. There’s an annual limit on the amount you’ll pay Social Security taxes on, and that’s also the annual limit that counts toward calculating your benefit.
The taxable maximum earnings amount changes every year to account for increases in wage inflation. But if you earn above that annual limit for 35 years, you’ll be in line to receive the maximum Social Security benefit in retirement.
The following table details the taxable maximum in each of the past 50 years.
| Year | Earnings | Year | Earnings |
|---|---|---|---|
| 1975 | $14,100 | 2000 | $76,200 |
| 1976 | $15,300 | 2001 | $80,400 |
| 1977 | $16,500 | 2002 | $84,900 |
| 1978 | $17,700 | 2003 | $87,000 |
| 1979 | $22,900 | 2004 | $87,900 |
| 1980 | $25,900 | 2005 | $90,000 |
| 1981 | $29,700 | 2006 | $94,200 |
| 1982 | $32,400 | 2007 | $97,500 |
| 1983 | $35,700 | 2008 | $102,000 |
| 1984 | $37,800 | 2009 | $106,800 |
| 1985 | $39,600 | 2010 | $106,800 |
| 1986 | $42,000 | 2011 | $106,800 |
| 1987 | $43,800 | 2012 | $110,100 |
| 1988 | $45,000 | 2013 | $113,700 |
| 1989 | $48,000 | 2014 | $117,000 |
| 1990 | $51,300 | 2015 | $118,500 |
| 1991 | $53,400 | 2016 | $118,500 |
| 1992 | $55,500 | 2017 | $127,200 |
| 1993 | $57,600 | 2018 | $128,400 |
| 1994 | $60,600 | 2019 | $132,900 |
| 1995 | $61,200 | 2020 | $137,700 |
| 1996 | $62,700 | 2021 | $142,800 |
| 1997 | $65,400 | 2022 | $147,000 |
| 1998 | $68,400 | 2023 | $160,200 |
| 1999 | $72,600 | 2024 | $168,600 |
Data source: Social Security Administration.
It’s important to remember the other factors that go into determining your monthly benefit. It’s not enough to earn the taxable maximum earnings for 35 years in your career. You also need to wait until age 70 to maximize your monthly benefit.
Should you aim for the maximum Social Security benefit?
There’s a lot you could do with $58,476 in Social Security benefits every year. And when you add your spouse’s benefit into the mix, you’ll have a relatively high annual income from Social Security alone. What’s more, a successful career with a salary high enough to consistently exceed the Social Security maximum earnings is going to set you up for success financially.
But you can’t afford to squander the opportunity afforded by a high salary. It’s important to save for retirement outside of Social Security, so that you can retire on your own terms and enjoy your golden years the way you want. If you don’t save, you’ll be waiting until age 70 to retire, and you’ll see your income drop significantly if you rely on Social Security alone.
Achieving the maximum Social Security benefit is a fine goal to aim for as long as it’s not your only retirement goal.