Seniors are frequently advised to save for retirement on their own rather than relying too heavily on Social Security. That’s not bad advice, given that the average senior today receives $1,663 in benefits per month.
However, while the average Social Security benefit today is $1,663, the maximum monthly benefit is much higher. In fact, if you play your cards right, you could qualify for $4,194 per month from Social Security. Here’s how to tell if you’re on track to make that kind of money.
1. ARE YOU A HIGHER EARNINGS PERSON?
If you make more money, you may be eligible for the maximum Social Security benefit. Your benefit is calculated based on your earnings during your 35 most profitable years of employment. However, not all earnings are considered for Social Security purposes.
Every year, a wage cap is established to limit the extent to which wages are taxed and counted for Social Security purposes. This year’s cap is $147,000. That means if you earn $147,000 or more, you could be on your way to receiving the maximum benefit. To be clear, your earnings must exceed the wage cap for the entire 35-year period in order to receive the maximum Social Security benefit.
2. HAVE YOU BEEN IN THE WORKFORCE FOR 35 YEARS?
We recently discovered that your monthly Social Security benefit will be calculated using your 35 highest-paid years of earnings. However, if you do not work the full 35 years, your benefit calculation will include a $0 for each year you are not earning an income. As a result, you will not be eligible for the maximum monthly benefit.
3. ARE YOU DELAYING YOUR FILING AS LONG AS YOU CAN?
You can collect your Social Security benefit in full once you reach full retirement age (FRA). However, filing at the FRA will not provide you with the maximum benefit. To get it, you’ll have to postpone your claim past FRA, all the way up to age 70.
WHAT IF YOU DON’T GET THE MAXIMUM SOCIAL SECURITY BENEFIT?
You may be eager to get as much money out of Social Security as possible. But if it doesn’t appear that you’re on track to receive the maximum monthly benefit, don’t worry.
Most seniors do not receive nearly $4,194 per month from Social Security. Even if your benefit is much lower, there are steps you can take to supplement your retirement income, such as saving consistently or working part-time during retirement.
If your Social Security benefit is significantly lower than expected, you may be able to supplement your income by renting out a portion of your home or even a parking space in your driveway. If you live in an area where parking is scarce, this could be a lucrative business.
In any case, don’t get too hung up on getting the most out of your monthly benefit. You may miss out due to factors beyond your control, so focus on the things you can control, such as delaying your filing to increase your benefit above what you’d be eligible for at FRA.