How Will Your Social Security Stack Up to the $ 4,194 Max? | Personal-finance

(Selena Maranjian)

If you’re assuming the topic of Social Security is boring, think again. There’s a good chance that Social Security will provide some 25% or 50% or more of your entire income in retirement. So it’s kind of important.

Once you start thinking about it, you might wonder just how much you can expect from Social Security and what’s the most you can hope for. The maximum monthly benefit was recently set at $ 4,194 per month.

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How your benefit is determined

First off, it’s good to understand just what goes into the formula that determines your benefit. It’s based on your income from the 35 years in which you earned the most. Of course, it adjusts your earnings from past years for inflation. So clearly, the more you’ve earned, the more you’ll collect. There’s a limit, though. The maximum benefit for those who start collecting benefits in 2022 is $ 4,194 – or about $ 50,000 per year.

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But do not get too excited. Relatively few people will collect the maximum amount. The average monthly Social Security retirement benefit was recently $ 1,663 – or about $ 20,000 annually. There’s a decent chance you’ll get more than that, but just remember: Fully half of beneficiaries are collecting less.

What will you get?

If you’ve earned above-average income in your working life, you’ll collect more than $ 1,663 (or whatever the average monthly benefit is when you start collecting). The best way to get an idea of ​​what to expect is to set up a my Social Security account at the Social Security Administration (SSA) website. When you do, you’ll find estimates of your benefits, depending on when you start collecting, and you’ll see the SSA’s record of your earnings year by year. (If you spot any errors, look into having them fixed so you receive the highest benefits to which you’re entitled.)

Who gets that $ 4,194 maximum Social Security benefit?

So who gets that maximum payout? Well, it goes to those who waited until age 70 to start collecting benefits spirit earned the maximum income allowed in each of at least 35 working years.

The maximum income allowed each year isn’t zillions of dollars, and it isn’t even a million dollars. For each year, there’s a specified earnings cap – an income level beyond which you’re not taxed for Social Security. In 2022, the limit is $ 147,000. (It tends to be increased every year.) So you’d need to earn at least $ 147,000 in 2022 and at least that amount in each of your future working years that are counted to determine your Social Security benefit.

Most of us do not earn that much in most or all of our working years, so collecting that maximum payout just isn’t in the cards. Do not despair, though.

Good news: You can make your checks bigger

The good news is that whatever your Social Security benefit is likely to be when you retire, there are multiple ways to increase that amount.

For example, each of us has a “full retirement age” at which we can start collecting the full benefits to which we’re entitled, based on our earnings history. For most of us, that age is 66 or 67. However, we can start collecting as early as age 62, but if we do, our benefits will be smaller. On the other hand, for every year we delay starting to collect beyond our full retirement age, our benefits will grow by about 8%. So if you wait until age 70 (the latest age at which retirees can start collecting), your benefits will grow some 24%.

Note, though, that those collecting early will receive many more checks than those collecting late. The delaying strategy will only get you more total Social Security dollars if you live a longer-than-average life.

Take a little time to learn more about Social Security, and you may be able to beef up those benefits. While you probably won’t end up with $ 4,194, you might get more than you expected.

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