
Chances are good you won’t max out your delayed retirement credits or earn the maximum taxable wage for 35 years or more. So it’s very likely your monthly Social Security checks won’t come close to the $4,194 max benefit. And that’s OK, as long as you plan ahead for what your own benefits are likely to be and save enough that you can live on those benefits when combined with retirement account withdrawals. In 2021, you had to earn $142,800 to earn the maximum taxable wage that would put you on the path toward maxing out Social Security. If that same person waits to get benefits until age 70, their monthly benefit increases to $1,253. The larger amount is due to the delayed retirement credits earned for the decision to postpone receiving benefits past FRA.
You can also delay benefits past your FRA and accumulate delayed retirement credits at a rate of 2/3 of 1% per month until you reach 70. That gives you a maximum of 124% of your PIA per month if your FRA is 67 or 132% if your FRA is 66. For those who sign up at other ages, the government adjusts your benefit up or down accordingly. When you sign up before your FRA, your checks shrink by 5/9 of 1% per month for up to 36 months.
You’ll Have to Earn More in 2022 to Max Out Your Social Security Benefits
However, for the average American who is collecting $1,706 per month, the increase will be a little under $55 per month. The increase will take effect in January 2024 for the more than 66 million Social Security beneficiaries. Around 7.5 million SSI recipients will see the bump slightly sooner, starting with their payment on Dec. 29, 2023. Some people receive both retirement benefits and SSI, but the total number of recipients is about 71 million. Over 70 million Americans who receive Social Security or Supplemental Security Income (SSI) benefits will see a 3.2% cost of living adjustment (COLA) in 2024, the Social Security Administration announced recently. For instance, that means the September 2023 average retiree benefit of $1,793 will increase by $57 starting in January 2024.

Sign up for or log in to your personal my Social Security account today. Choose email or text under “Message Center Preferences” to receive courtesy notifications. However, qualifying for payments worth $3,000 or more requires some serious career planning throughout your life.
- The first one is pretty self-explanatory, so we’ll touch on just the last two.
- The federal government increased the Social Security tax limit in eight out of the past 10 years.
- Exactly how much you’ll collect in benefits depends on several factors.
- The taxable wage cap is subject to an automatic adjustment each year based on increases in the national
average wage index (not the inflation rate), calculated annually by the SSA.
Known as the “self-employment tax”, you’ll need to complete a Schedule SE to calculate this tax, and then report the amount due on your Form 1040. At a rate of 6.2%, the maximum Social Security taxes that your employer will withhold from your salary is $9,114. Employers then match any Social Security taxes withheld from their staff’s salaries. Recall that the headline Consumer Price Index (CPI) hit its recent high mark of 9.1% in June 2022, but is now at a much tamer 3.7% as of September 2023. The maximum Social Security benefit in 2024 will climb to $4,873 per month.
You Probably Won’t Earn the Maximum Social Security Benefit. Here’s Why
Social Security benefits are calculated by combining your 35 highest-paid years (if you worked for more than 35 years). Wages from previous years are multiplied by a factor based on the years when they were earned. This calculation gives an amount comparable to buying power based on the current value of the dollar. Accounting for this valuation change is important because a salary of $14,000, for example, was far more impressive in 1954 than it is today. The self-employment tax is based on a Social Security tax rate of 12.4% and a Medicare tax rate of 2.9%. These rates are double those paid by employees, since a self-employed person must pay both the employee’s portion and the employer’s portion of both taxes.
So, if one spouse has a Social Security payment of $3,345 per month at full retirement age, the other spouse might qualify for a spousal payment of up to $1,672.50 monthly. And after you pass away, your spouse could receive a survivor’s payment of the full $3,345 per month, which would also be adjusted annually for inflation. Full retirement age (FRA) is the age when you are eligible to collect full Social Security retirement benefits, and it is based on the year when you were born.
Although his earnings for the year substantially exceed the 2023 annual limit ($21,240), John will receive a Social Security benefit for July, August, and September. This is because he was not self-employed and his earnings in those 3 months are $1,770 or less per month than the limit for people younger than full retirement age. If you want 5 cash flow performance kpis every cfo needs to track to receive the maximum $4,194 monthly payments, however, you’ll need to wait until age 70 to file for benefits. Starting Jan. 1, 2022, the maximum earnings subject to the Social Security payroll tax will increase by $4,200 to
$147,000—up from the $142,800 maximum for 2021, the Social Security Administration (SSA)
announced Oct. 13.
Look for More IRS Form Revisions Now that the Inflation Reduction Act is Law
The retirement earnings test remains in effect for individuals below normal retirement age (age 65 to 67, depending on year of birth) who continue to work while collecting Social Security benefits. For affected individuals, $1 in benefits will be withheld for every $2 in earnings above $21,240 in 2023 (up from $19,560 in 2022). As you can see, only a very small percentage of people end up waiting until age 70 to first start their Social Security checks. The adjustment will boost the average monthly retirement benefit by more than $140 starting in January.
What age will you claim?
“If you are laid off, find a part-time or lower-wage job, even if it’s temporary. Your earnings will likely count toward your future benefit and will prevent a zero from being used in the calculation.” The maximum Social Security benefit changes based on the age you start your benefit. Those who postpone claiming Social Security between ages 62 and 70 become eligible for higher payments with each month of delay.
If you thought 2023’s $4,555 max was good, wait until you hear this.
The SSA also
posted a fact sheet summarizing the 2023 cost-of-living adjustments (COLAs). If you collect Social Security early, say at 62, and earn income from work that exceeds the income limit, Social Security will deduct $1 from your benefit payments for every $2 you earn above the annual limit. Keep in mind that this income limit applies only to the Social Security or Old-Age, Survivors and Disability Insurance (OASDI) tax of 6.2%. The other payroll tax is a Medicare tax of 1.45%, and you’ll have to pay that for all income you earn.
The OASDI tax is the amount of money taken from your earned income to pay for Social Security benefits. You give up a portion of your salary, and your employer has to pay a matching portion as well. Employees and their employers across the country pay to fund the benefit payments that retirees receive. The idea is that you contribute to Social Security benefits throughout your career. Then, once you retire, current workers will keep contributing to the fund while you receive benefits. If you wait past your FRA to collect Social Security retirement benefits, you’ll receive credits for each month that you delay up to age 70.
The SSA also
posted a fact sheet summarizing the 2022 cost of living adjustments (COLAs). Certain family members may be able to receive additional payments based on your work record. For example, a spouse qualifies for spousal payments worth up to 50% of the higher earner’s benefit at full retirement age, if that is worth more than the payment based on his or her own work record.
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