Do you qualify for Social Security benefits up to a maximum of $4,194? | Smart Change: Personal Finance

With that in mind, here’s a summary of the three criteria a person must meet in order to receive the maximum possible Social Security retirement benefits, how much a U.S. citizen really gets, and how you can use that knowledge to maximize your Social Security benefits. .

For a person to get the most out of their Social Security retirement benefit, all of these things must be true:

1. You have worked for at least 35 years in a job covered by Social Security. Unlike many pension plans, which calculate your benefits based on your last few years of employment, Social Security takes the top 35 inflation-adjusted years and wages and calculates them together. If you have less than 35 years of work experience, zeros are used in calculating the missing years.
2. You have earned at least the maximum Social Security payroll taxable income in all of the 35 years in which you earn the highest. For 2022, that limit is $147,000, and it has increased with inflation over the years. Your top 35 is indexed for inflation and averaged to calculate your average indexed monthly earnings. Therefore, in order to reach the maximum of the average, it should be as high as possible throughout the 35 years under study. Fortunately, many people will work for over 35 years. Doing so gives you a little wiggle room, allowing you to drop some years of low income from your benefits account.
3. You must wait until you are 70 to start receiving benefits. Even for high-income earners, this is usually a limiting factor. For each year you wait past your full retirement age (until you reach 70), your monthly Social Security benefit will permanently increase by 8%.

As you might imagine, few retirees meet all three of these criteria. Most of them have at least 35 years of work experience. But the other two types are less common.

• In any given year, about 6% of workers earn more than the maximum income subject to the Social Security wage tax. Far fewer have earnings above this level in all of their 35 highest-earning years.
• Only 5% of men and 7% of women wait until their 70th birthday to claim their benefits. In fact, the most common age for Americans to apply for Social Security is 62 – the youngest age at which they are eligible to do so.

As of March 2022, the average Social Security retirement benefit was $1,665 per month — well below the maximum. The program is designed to provide a benefit that replaces about 40% of your usual pre-retirement US income. It is not intended to be sufficient as the sole source of cash for a person in retirement.

The best place to get a personalized estimate of your future benefits is to log into your My Social Security account (and if you haven’t yet created one, you should) and view your most recent statement. Among other information, it will include an estimate of how much you will be entitled to at full retirement age, as well as an estimate of what you would receive if you claimed Social Security early or late, based on your actual work history.

The bottom line is that although most retirees will not be eligible for maximum Social Security benefits, understanding how benefit is determined puts you in a better position to maximize your benefit. For example, if you’ve only worked for 34 years and are considering retirement, it may be worth staying in your job for another year to prevent zero from being used when calculating life expectancy. Or if you’re considering claiming Social Security at age 65, waiting until full retirement age could increase your monthly paychecks by hundreds of dollars.

Social Security is the only inflation-protected income source that the majority of retirees will receive, so it’s smart to know how much you can expect from it, and to take steps to increase this benefit if you think you’ll appreciate a little more reliable income after retirement.

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