Most people don’t make this much money. Don’t sweat it, though. There’s still much you can do to secure a nice retirement.
Nobody expects their Social Security benefits to provide a posh lifestyle in retirement. However, a handful of people are collecting surprisingly big payments from the government-run entitlement program. Next year’s maximum monthly payment is a hefty $5,108, or full-year income of $61,296. That’s not bad, particularly when combined with other sources of retirement income.
The number begs a question among pre-retirees, though. That is, how exactly does anyone qualify for such a large sum when the average Social Security payment stands at a little less than $2,000 per month?
Here’s what it takes.
How to max out Social Security’s retirement benefits
There are several keys to securing the biggest possible Social Security payments. Chief among them, however, is your income while working. The more you make and pay FICA taxes on during your working years, the more money you get back in retirement. To ensure you’re collecting the maximum benefit, you must earn a minimum amount of work-based wages each and every year. Next year’s Social Security-taxable ceiling stands at $176,100, up from this year’s $168,000. The table below lays out all the maximum taxable thresholds going back a few decades.
| Year | Social Security’s Taxable Earned Income Ceiling | Year | Social Security’s Taxable Earned Income Ceiling |
|---|---|---|---|
| 1984 | $37,800 | 2005 | $90,000 |
| 1985 | $39,600 | 2006 | $94,200 |
| 1986 | $42,000 | 2007 | $97,500 |
| 1987 | $43,800 | 2008 | $102,000 |
| 1988 | $45,000 | 2009 | $106,800 |
| 1989 | $48,000 | 2010 | $106,800 |
| 1990 | $51,300 | 2011 | $106,800 |
| 1991 | $53,400 | 2012 | $110,100 |
| 1992 | $55,500 | 2013 | $113,700 |
| 1993 | $57,600 | 2014 | $117,000 |
| 1994 | $60,600 | 2015 | $118,500 |
| 1995 | $61,200 | 2016 | $118,500 |
| 1996 | $62,700 | 2017 | $127,200 |
| 1997 | $65,400 | 2018 | $128,400 |
| 1998 | $68,400 | 2019 | $132,900 |
| 1999 | $72,600 | 2020 | $137,700 |
| 2000 | $76,200 | 2021 | $142,800 |
| 2001 | $80,400 | 2022 | $147,000 |
| 2002 | $84,900 | 2023 | $160,200 |
| 2003 | $87,000 | 2024 | $168,600 |
| 2004 | $87,900 | 2025 | $176,100 |
Data source: Social Security Administration.
Earning more than these caps won’t help, to be clear. Work-related earnings beyond these thresholds aren’t taxed by Social Security and don’t go into the calculations for average lifetime earnings. But making less than this annually adjusted figure means you’ll end up with at least a little less than the maximum monthly payment of $5,108 later in life.
The second component of maxing out Social Security’s retirement benefits is closely linked to the first requirement. That is, you must reach or exceed the minimum earnings threshold for at least 35 years. See, for the purposes of calculating your eventual payment, the Social Security Administration considers your 35 highest-earning years relative to the yearly thresholds on the table above.
Surpassing these thresholds in more than 35 years doesn’t do you any additional good, by the way. Conversely, you don’t have to work a full 35 years to collect Social Security retirement benefits. The administration simply assigns a zero for any years shy of a total of 35. Like any mathematical average, though, this will ultimately lower the net amount of payment you’re eventually due.
Last but not least, although the official full retirement age — or FRA — is 66 or 67 (depending on when you were born), anyone on track to collect $5,108 per month in the coming year didn’t retire at either of those ages. They waited until they turned 70 years old to claim benefits. Doing so added roughly 27% to the payments they would have seen if they’d initiated benefits at their full retirement age.
You should be looking beyond Social Security anyway
You already know your Social Security benefits will be nowhere near this number? Don’t sweat it. Most people don’t even come close. As was already noted, the average payment is just a little less than $2,000 per month. Only about 22,000 of the program’s 51 million current beneficiaries are seeing monthly payments of more than $4,800 (versus 2024’s maximum of $4,873).
The thing is, it doesn’t entirely matter. You could do at least as well — if not markedly better — investing for retirement on your own beyond your required participation in Social Security.
Numbers provided by the Social Security Administration and backed by the Economic Policy Institute, as well as the Center on Budget and Policy Priorities, all confirm that the effective rate of return on Social Security’s pool of funds is in the low single digits, barely outpacing any given year’s rate of inflation. Even if you can only scrape together a couple extra thousand bucks per year to tuck away in an individual retirement account, you’re still at least plugging into the broad market’s long-term average annual rate of return of around 10%.
Earning that kind of yearly return on $3,000 worth of annual contributions would leave you with a nest egg of nearly $900,000 after 35 years. If you can raise your annual savings to $5,000, the number jumps to $1.5 million. Either amount of money would generate nice retirement income to add to whatever Social Security you’re due.
Of course, the trick is doing whatever it takes to come up with that contribution year in and year out in the first place. It’s certainly worth any sacrifice you might have to make to make it happen, though.
