Millions of Americans rely on Social Security benefits each month to pay for ordinary living expenses. Nearly a quarter of Social Security benefit recipients rely solely on those benefits for their income. At least half of recipients rely partially on their Social Security income to make ends meet. With so much reliance on these benefits, it is only natural that retirees want to get the most money possible from Social Security. So, what is the maximum Social Security payment that you can receive? This article will detail the maximum amount that you can receive on each type of Social Security benefit, as well as steps you can take to maximize the amount that you will receive.
Maximum Social Security Benefits For 2022
Many people wonder, “How much does Social Security pay?” You may already know that your Social Security benefits are calculated based on your earnings history. The more money you make during your working years, the more money you can expect from Social Security during retirement. However, there is a maximum monthly benefit paid by the Social Security Administration (SSA). The maximum amount that you can receive each month if you start benefits at full retirement age for Social Security in 2022 is $3,345. If you start benefits early at age 62, the maximum amount you can receive is $2,364. Finally, waiting until age 70 to start your benefits can raise the maximum to $4,194.
Remember that you only pay Social Security taxes on up to $147,000 of annual income. This is your maximum taxable income for Social Security purposes. If you make more than that each year, you will not pay Social Security taxes on any amount above $147,000 in 2022. Now you can see how the earnings limit relates to the max SS amount.
The amounts above all reference retirement benefits. Similarly, there is a maximum that Social Security disability benefits will pay as well. For 2022, that amount is $3,345. It is extremely rare for anyone to receive the maximum. On average, SSDI recipients get $1,358 per month, and only 10% of benefit recipients get more than $2,000 per month. For those receiving Supplemental Security Income (SSI) payments, the 2022 maximums are $841 for an individual and $1,261 for an eligible married couple.
Calculating Your Monthly Social Security Benefit
Can you calculate your own Social Security retirement benefit amount? Absolutely! Though the calculation is quite cumbersome, you can manually calculate how much your Social Security check will be when you start your benefits. First, you will need to calculate your average indexed monthly earnings or AIME. You do this by using your 35 years of highest income. If you worked fewer than 35 years, then your earnings will be considered zero for the years in which you did not work. Your earnings for each year are indexed to account for inflation. For example, if you made $65,000 in 2010, then that might be equivalent to $71,000 in today’s dollars. Once your earnings are indexed, you will divide that by 420 to come up with your monthly average.
After getting the AIME amount, you will perform some adjustments based on cost-of-living adjustments and the timing of your benefits. Starting your benefits before full retirement age (FRA) will decrease your benefits. Waiting until age 70 to claim Social Security retirement benefits will add more money to your Social Security payments. If you hear someone mention delayed retirement credits, this means that they are waiting past full retirement age to collect Social Security. The longer you wait, the more credits you have. You reach your maximum credits at age 70, so there is no need to wait past age 70 to start your benefits.
Another way to calculate your benefits is to register for a free My Social Security account with the Social Security Administration. By using this online account, you can access your entire Social Security statement. This means that you can see your full earnings history and how much you have paid in Social Security taxes. They also have a tool there that you can use to quickly estimate your benefits at retirement age. When using this tool for retirement planning, remember that you should also take into account the cost of Medicare and any income that you might receive from pensions, annuities, or 401k plans. A financial planner can assist you in this planning and offer advice based on your personal finances.
How To Maximize Your Social Security Payments
It should come as no surprise that most people want to maximize their retirement income, and many do this by maximizing their monthly payments from Social Security. With the average Social Security retirement benefit in 2022 being $1,657, you can quickly see that many people are not maximizing their benefits. So, how can you make sure that you get the most money possible each month from your benefits? Here are some tips to help.
— Max Out Your Earnings
In 2022, the Social Security tax limit is $147,000. In order to max out your benefits at retirement age, you will need to max out your maximum taxable earnings during your working years. If you work a side hustle or perform odd jobs for money, then you need to claim those earnings and pay Social Security taxes on them. Otherwise, they will not become part of your earnings record, and they will not be used when calculating your retirement benefit. Maxing out your earnings while you work will go a long way toward maxing out your benefit when you finally get ready to retire.
— Work At Least 35 Years
When calculating your primary insurance amount, the Social Security Administration uses your 35 highest years of income. If you worked less than 35 years, then you get a zero for those years. For example, if you only worked for 25 years, then your average will be calculated with ten zeros. Using zero for even one year worth of earnings will heavily pull down your average. So, you need to work for at least 35 years to help maximize the amount that you will receive during retirement. Working less than 35 years might not affect your eligibility to receive benefits, but it can have a huge impact on the amount that you receive.
— Wait Until Age 70 To Start Benefits
The age at which you start your benefits also plays a big role in how much Social Security you receive. Though you may have enough qualifying work credits to start your benefits at age 62, you should wait! Your lifetime earnings record is likely already in place by this time, but you can add more to your monthly payments by delaying the start of your benefits. These delayed retirement credits can add up quickly, as waiting just a couple of years to start your benefits can add a few hundred dollars to your monthly payments. You will max out these credits at age 70, so go ahead and start your benefits by then to get the highest amount possible on your Social Security check each month.
Spousal Benefits & Social Security Family Maximum
In addition to the primary earner, there are other Social Security beneficiaries who might be able to receive benefits from your earnings record. The first is your spouse. Eligible spouses may receive up to 50% of the benefit amount of the primary recipient. For example, if you receive $2,000 each month in benefits, then your spouse can get up to $1,000 each month as well. In some cases, even ex-spouses can qualify for this benefit. Upon the death of your spouse, your spousal benefit can be switched to survivor benefits. Survivor benefits for a spouse can be up to 100% of the benefit amount that was being paid to the deceased spouse.
In addition to a spouse, children are also eligible for survivor benefits. A child can receive up to 75% of the deceased parent’s benefit amount. This is often where the family maximum comes into play. When it comes to Social Security family benefits, there is a maximum amount that can be paid each month to one family. Suppose that a deceased benefit recipient left behind four eligible children and a spouse. Adding up the individual amounts would come to well over 300% of the normal benefit amount. Social Security caps the family maximum at around 180% of the original benefit. So, a family cannot receive more than this even if there are multiple beneficiaries who might receive individual benefits.
Maximum Social Security Disability Benefit
Just like retirement benefits, SSDI benefits also have a maximum amount that will be paid each month. Calculating SSDI benefit amounts is a little more complicated than retirement benefits. Most SSDI recipients do not have 35 years of work history. However, they need at least ten years of work history to qualify for SSDI payments in most cases.
In 2022, the maximum amount that you can receive on SSDI is $3,345. This is identical to the maximum retirement benefit. However, you should know that this number is almost never attained by someone on SSDI benefits. In fact, SSDI payments are typically lower than Social Security retirement payments. The average disabled worker in 2022 will receive $1,358 per month in benefit payments. This is roughly $300 less than the average monthly retirement benefit. These benefits are usually lower because the recipients have not paid Social Security taxes for as long as retirees.
The Bottom Line
When it comes to Social Security retirement benefits, the sky is not the limit. In fact, the limit in 2022 is $3,345 if you start your benefits upon reaching full retirement age. Starting your benefits earlier than retirement age will reduce this amount, but delaying your benefits can cause this amount to go all the way up to $4,194. There are a few things that you can do to maximize your Social Security benefits. The things that will have the most impact on your payments are to max out your earnings, work at least 35 years, and wait until age 70 to start your benefits. Very few people receive the maximum benefit amount each month from Social Security, but with careful planning, you can get closer to achieving that Social Security max.
Frequently Asked Questions
How much do you have to earn to get maximum Social Security?
To get the max Social Security benefit, you need to earn the maximum taxable income each year. For 2022, this means that your taxable income needs to be at least $147,000. Almost every year, this limit is adjusted for inflation. In 2021, the maximum was $142,800, so you can see that the amount went up $4,200 in just one year. However, 2022 saw the highest cost-of-living adjustment in decades. So, the increase is typically not quite as high as the one you see here. In most years, you can expect roughly a 3% increase.
What are the types of income that can be counted for Social Security?
As long as your income is taxable, then it can be counted for Social Security. You must claim the income on your tax returns and pay Social Security taxes on it for the income to be counted. This might be income from a regular full-time or part-time job. It could also be income from a side hustle or freelance gig. The one exception here is that the income must be considered income from working to be counted toward Social Security. For example, if you realize capital gains from the sale of stocks, this income will not be counted toward your Social Security full benefits even though you must pay income tax on it.
What are the limitations of Social Security?
The biggest limitation of Social Security is that it should not be relied upon as your sole means of retirement planning. You should plan for retirement by saving money on your own through a 401k, IRA, or other means. If you rely solely on Social Security, then you will likely find that you do not have enough income each month to make ends meet. The average payments from Social Security would make it extremely difficult to pay for basic living expenses. So, you should have other income during retirement on which you can also rely.