With so many Americans coming up short on retirement funds, they often look to their Social Security benefits to help fill the income gap. Despite the political alarms being sounded about the long-term viability of the nation’s retirement system, there’s no reason to worry that the program will go away anytime soon. With that in mind, let’s ask these questions: What is the maximum social security amount you can receive per month? And how can you qualify?
First, the short answers: The maximum amount a retiree can earn per month in 2017 is $3,538, according to Social Security’s “Workers With Maximum-Taxable Earnings” table. However, getting a monthly check of that amount is no easy task.
Your monthly benefits are based on your lifetime earnings. Because the cost of money (inflation) changes over time, your earnings are adjusted to account for those changes. Social Security calls those adjustments “indexing.”
Social Security looks at the 35 years in which you earned the most income and applies a formula that calculates your benefit or “primary insurance amount,” if you want to use the official Social Security language. If you want to learn how the math works, Social Security has a worksheet that will help you estimate your earnings.
In general, you would have had to earn at least $127,200 per year for the past 35 years to qualify for the full amount in 2017. Only about six percent of workers will meet that threshold. What’s more, if you’re not at retirement age, the 2017 numbers aren’t very important to you because the maximum social security payout and the amount you have to make each year will continue to rise over time.
To shore up Social Security lawmakers are considering different ways of creating more income. One idea is to raise the income cap to something much higher—$270,000, or 90 percent of covered earnings in 2016.
That means Social Security taxes would go up for high-income workers but, presumably, so would the amount you would have to earn to qualify for the maximum benefit. Regardless of what happens politically, what is a near certainty is that younger earners will have to make significantly more than today’s workers to qualify for the maximum benefit.
Being a member of the six-percent club isn’t the only qualification for receiving a Social Security check for the maximum amount. Most people know that they can’t claim any Social Security retirement benefits until they’re at least 62 years of age. Because that means you’d start receiving benefits 48 months earlier than the full retirement age of 66, Social Security will only pay 75 percent of your full benefit amount, so your maximum benefit at 62 would be $2,153.
Full retirement age is currently 66 (though it may be as early as age 65 and will rise to 67, depending on when you were born). That’s when you’re eligible for 100 percent of your earned benefits, but the most you can make if you start receiving benefits then is $2,687. Still not close to the $3,538 that we’re looking for. To reach that amount, you can’t start collecting benefits until age 70, but only about two percent of workers wait that long. Once you reach the age of 70, your benefits don’t rise.
Icing on the Cake
The maximum benefit might be $3,538, but, clearly, seeing a check of that size in your mailbox isn’t likely if statistics are true. Your better bet is to save enough over the years to make your Social Security benefit icing on your financial cake rather than a key source of income. Be smart and plan for your retirement.