How To Get The Maximum Social Security Benefit
For a person to get the maximum possible Social Security retirement benefit, all of these things must be true:
How We Deduct Earnings From Benefits
In 2022, if youre under full retirement age, the annual earnings limit is $19,560. If you will reach full retirement age in 2022, the limit on your earnings for the months before full retirement age is $51,960.
Starting with the month you reach full retirement age, there is no limit on how much you can earn and still receive your benefits.
Let’s look at a few examples. You are receiving Social Security retirement benefits every month in 2022 and you:
Are under full retirement age all year. You are entitled to $800 a month in benefits.
You work and earn $29,560 during the year. Your Social Security benefits would be reduced by $5,000 . You would receive $4,600 of your $9,600 in benefits for the year.
Reach full retirement age in August 2022. You are entitled to $800 per month in benefits.
You work and earn $63,000 during the year, with $52,638 of it in the 7 months from January through July.
- Your Social Security benefits would be reduced through July by $226 . You would still receive $5,374 out of your $5,600 benefits for the first 7 months.
- Beginning in August 2022, when you reach full retirement age, you would receive your full benefit , no matter how much you earn.
If you are eligible for retirement benefits this year and are still working, you can use our earnings test calculator to see how your earnings could affect your benefit payments.
Why We Have An Earnings Limit
Not long ago, a viewer on my YouTube channel asked me to give her a good reason why we have the Social Security earnings limit. The comments that followed showed how many viewers shared the belief that the earnings limit is unfair and should be eliminated.
In my response, I explained that the rationale behind the entire program of Social Security was to create a safety net. The original intent of the Social security program was not to supplement retirement income, but to keep the elderly out of poverty.
I also added that todays earnings limit is relatively generous compared to where the Social Security earnings limit began. The original Economic Security Bill President Roosevelt sent to Congress featured a very restrictive earnings limit.
That bill stated, No person shall receive such old-age annuity unless . . . He is not employed by another in a gainful occupation.
Whoa! This means that if you had even a single dollar in wages from a job, you could not collect a Social Security benefit at all.
Thankfully, the system we have in place today allows for individuals to have some earnings from work while they are receiving a Social Security benefit.
However, its very important to stay informed on the dollar amount of this limit because it changes every year.
For 2022, the Social Security earnings limit is $19,560. For every $2 you exceed that limit, $1 will be withheld in benefits.
2022 Social Security Earnings Limit
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Retire At A Certain Age
In general, if you retire when youre older, your maximum benefit will be higher. So for someone retiring at 65 in 2022, the max benefit would be $2,993. But for someone retiring at 70 in 2022, the max benefit would be $4,194.
Benefit amounts increase thanks to the additional years of contributing to Social Security. Youd need to decide if waiting longer to retire makes sense for your situation, though. Think about whether its worth it for you.
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How Social Security Adjusts Family Benefits
Social Security adjusts the auxiliary benefits it pays to keep the family benefit below the maximum. The primary earners benefits are never reduced due to the family benefit exceeding the maximum allowed. Only auxiliary benefits are reduced.
The reduction gets distributed equally among the family members receiving auxiliary benefits. In the above example, the spouse and the child would each have their benefits reduced by $200 to keep the family benefit from exceeding the maximum of $3,600.
The benefits paid to each auxiliary recipient may change over time. For instance, minor dependent children getting auxiliary benefits will stop being eligible, in most cases, after age 18. As that happens, the auxiliary payments going to other family members increase up to the maximum.
How Much You Earn
This last requirement is the kicker: You must have paid maximum Social Security taxes for 35 years or more. To do that, you would have had to earn income equal to or higher than Social Security’s taxable maximum.
The taxable maximum is always a big number. In 2022, it’s $147,000. Next year, it’ll be $160,200.
The 2022 threshold of $147,000 is more than two and a half times the median annual salary for U.S. workers, which is $55,640. It’s an incredible accomplishment to earn that six-figure max in one year. In 2020, only 6% of the working population hit that mark.
Sadly, a much smaller slice of the population will reach that threshold 35 times or more.
Want The Max $4194 Social Security Benefit Here’s The Salary You Need
There is a maximum Social Security benefit seniors can receive. In 2022, it’s $4,194. This generous retirement benefit is available to people who earned the highest possible average wage and wait as long as possible to claim Social Security benefits.
So what is the highest possible average wage, and what salary would you need in order to hit this target? Here’s what you need to know.
Image source: Getty Images.
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What Is The Expected Social Security Increase For 2023
As such, a 10.5% COLA would increase the average retiree benefit of $1,668 by $175.10, rounded as done by the Social Security Administration, TSCL further notes. Based on the April CPI data released in May, TSCL estimated that the annual COLA for 2023 could be around 8.6%which would be the highest since 1981.
Social Security Benefits To Jump 87% In 2023 As Top Tax Hits $19865
As inflation runs the hottest in four decades, 70 million Americans will benefit from the largest Social Security cost of living adjustment since 1981.
The Social Security Administration announced today that benefits will jump 8.7% for 2023, the largest increase since 1981, when double digit inflation pushed payments up more than 11%. The cost-of-living adjustment affects 70 million Americans, including 48 million retired workers and their spouses and dependents those receiving disability and survivors benefits and recipients of Supplemental Security Income. The average retired worker will receive $1,827 a month in 2023, up $146 from $1,681 this year.
The 2023 COLA is based on the increase in the Consumer Price Index for Urban Wage Earners between the third quarter of 2021 and the third quarter of 2022meaning it looks backwards at inflation and was sealed this morning when the Bureau of Labor Statistics reported Septembers inflation rate. The large increase, combined with a 2023 drop in Medicare premiums , means seniors who rely on Social Security will be able to make up most of the ground theyve lost to inflation over the past year. In 2022, benefits went up 5.9%, but retirees lost a chunk of that to a 14.5% increase in Medicare Part B premiums.
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How Do Social Security Claimants Know If They Have To Pay Tax
The SSA mails the statement every January and it summarizes how much you received in benefits the previous year.
If you have not received this form, or if you’ve misplaced it, you can request a new one using your online social security account.
Select the “replacement documents” tab and follow the instructions to order your new form.
If it turns out you do owe taxes on your benefits, you can opt to make quarterly estimated payments to the IRS, or you can choose to have federal taxes withheld when you initially apply for benefits.
You can choose to have either 7%, 10%, 12% or 22% of your monthly benefit withheld for taxes.
We also explain why the COLA increase is bad news for retirees and future claimants.
Or Go All The Way And Work Until 70
The longer you hold off receiving your Social Security benefits, up to age 70, the bigger your check. So each month after youve reached your FRA, your payout increases by roughly 0.7% percent , which amounts to 8% per year. If you wait till age 70 then, your payments will be 32% bigger than if you had started taking benefits at 66. Once you turn 70 though, there is no added benefit in postponing payments.
Of course, working until 70 isnt for everyone, and theres no penalty in claiming your benefits when you reach your FRA. At that time, you will receive 100% of your benefit. Its also not a sure thing that waiting until 70 maximizes your lifetime benefit. After all, should you pass away the following year, waiting that long will mean you received far less total benefits than if youd claimed them as soon as you were eligible to. So consider your life expectancy as you make this decision.
Theres A Social Security Spousal Benefit
Marriage is rewarded when it comes to Social Security. One spouse can take whats called a spousal benefit, worth up to 50% of the other spouses Social Security benefit. For example, if your monthly Social Security benefit is worth $2,000 but your spouses own benefit is only worth $500, your spouse can collect a spousal benefit worth $1,000 bringing in $500 more in income per month.
Just as the benefit based on your own work history is reduced if you claim it early, the same is true for a spousal benefit. That 50% figure is the maximum amount that only a spouse who is at least full retirement age is eligible for. Taking the spousal benefit early at, say, age 62, reduces the amount to as little as 32.5% of the higher earners benefit. If you take your own benefit early and then later switch to a spousal benefit, your spousal benefit will still be reduced.
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MILLIONS of senior citizens and disabled Americans claim Social Security benefits.
About nine out of 10 individuals aged 65 and older receive monthly Social Security benefits, which account for nearly 33% of income for the elderly.
To qualify, seniors must have worked for a certain number of years and paid into the Social Security system for a certain amount of time.
The amount received depends upon when you were born, your earnings history, and when you begin to claim benefits.
Some households are also subject to pay taxes on their Social Security benefits, usually if there are additional significant earnings including wages, self-employed earnings, dividends, or other taxable income.
It’s important to note that Supplemental Security Income differs from monthly Social Security benefits. SSI payments are not taxable.
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Your Monthly Social Security Benefits Increase The Longer You Wait To Claim
While you can collect Social Security benefits as soon as you turn 62, taking benefits before your full retirement age will spell a permanent reduction in your payments of as much as 25% to 30%, depending on what your full retirement age is.
If you wait until you hit full retirement age to claim Social Security benefits, youll receive 100% of your earned benefits. But you can do even better by waiting to claim your Social Security benefits at age 70 your monthly Social Security benefit will grow by 8% a year until then. Any cost-of-living adjustments will be included, too, so you dont forgo those by waiting. Think of that time as bonus earning years and remember that youd be hard pressed to find those sorts of gains for zero risk during that period anywhere else.
Waiting to claim your Social Security benefits can help your heirs as well. By waiting to take her benefit, a high-earning wife, for example, can ensure that her low-earning husband will receive a much higher survivor benefit in the event she dies before him. That extra income of up to 32% could make a big difference.
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Maximum Family Benefit Exceptions
The maximum family benefit applies differently in some situations. For example, an ex-spouse is usually entitled to claim benefits based on his or her former spouses earnings record. These benefits dont count against the maximum family limit.
A non-working spouse who retires before reaching full retirement age could qualify for a reduced percentage of the primary breadwinners benefits. And if a family has two earners who are both eligible for benefits, each spouse can receive 100% of their own benefit, even if this would put the family over the maximum. This is because it only applies to benefits that can be claimed based on one earners record.
Another special case is when a minor dependent child is entitled to receive benefits from both retired parents. Then, Social Security uses a different limit, called the combined family maximum. The family maximum in this case can be as high as the total of both parents calculated family maximum, as long as it doesnt exceed the combined family maximum.
Are You Eligible For The $4194 Max Social Security Benefit In 2022
Nearly 70 million people in the U.S. receive Social Security benefits. But very few qualify for Social Security’s maximum benefit. In 2021, the maximum monthly check is $3,895, or $46,740 a year. But due to soaring inflation, the maximum benefit will rise to $4,194 a month in 2022, or $50,328 annually, a 5.9% increase.
However, a typical retired worker receives less than half of the maximum Social Security check. The average monthly retirement benefit was just $1,559 in September 2021.
Wondering whether your future Social Security check will be anywhere close to the maximum? Sorry, but there are no easy hacks. Here are the three things you’ll need to do to get there.
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What Could Happen To Future Benefit Increases
While 2023 marks a record high COLA, beneficiaries should be prepared for future years where increases are not as high.
If inflation subsides, the size of COLAs will also go down.
Whether the CPI-W is the best measure for the annual increases is up for debate. Some tout the Consumer Price Index for the Elderly, or CPI-E, as a better measure of the costs seniors pay. Multiple Democratic congressional bills have called for changing the measure used to calculate annual increases to the CPI-E. Others have suggested another measure, the Chained CPI, to help curb federal spending.
What About Taxes On Social Security
Social Security benefits may be taxable, depending on your “combined income.” Your combined income is equal to your adjusted gross income , plus non-taxable interest payments , plus half of your Social Security benefit.
As your combined income increases above a certain threshold , more of your benefit is subject to income taxâup to a maximum of 85%. For help, talk with a CPA or tax professional.
In any case, if you’re still working, you may want to postpone Social Security either until you reach your full retirement age or until your earned income is less than the annual limit. In no situation should you postpone benefits past age 70.
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