Here's The Salary You Need If You Want The Maximum Social Security Benefit In 2024

There have been noticeable changes to Social Security over the years. Perhaps the biggest change was pushing the full retirement age back to 67 (in 1983) for everyone born in 1960 or later (and the potential for the retirement age to get raised to 70 one day). While Social Security is by no means meant to be the singular source of a person's retirement, the disappearance of pensions and volatility of investments makes it a more guaranteed income source for many Americans. This is especially true for those who might not have traditional employer plans available to them (we're looking at you freelancers and small business owners). This might lead you to wonder how to get the maximum amount of benefits from Social Security.

For starters, as of 2024, the maximum monthly retirement benefit available is $4,873. However, numerous factors are involved in reaching that amount. From how many years you worked to how much you earned over the course of your career to how long you wait to receive benefits, there can be a LOT to know about collecting Social Security benefits. In order to receive the maximum amount of benefits, a person has to have earned the maximum taxable income for the entire 35 years of work history used to calculate their benefits. This cap has increased over the years, with the income for 2024 reaching $168,600. This means you would have had to be a high-income earner for your entire career, in addition to delaying your benefits until 70 in order to receive this amount.

How much you earn makes a difference

One of the biggest factors in determining your overall Social Security benefits has to do with how much you earned before you retire. However, with that in mind, it's also important to realize that the calculation Social Security uses averages your monthly earnings over 35 years. This means that if you end up with a low-paying job at some point, your overall final benefits amount should recover if you return to something higher-paying. Social Security chooses the specific years with the highest indexed earnings of your career and, combined with the national wage index, divides the total by the number of months in those years. While this all sounds complicated, the takeaway is that while your earnings over the course of your career may vary, Social Security calculations will attempt to even them out.

Another factor is that there are taxable earning limits on how much of your income is taxed toward Social Security. This means that Social Security would stop taxing your income once doing so would no longer contribute to your future monthly benefits. However, in an effort to combat inflation, cap levels have steadily increased to include almost everyone's income. As of 2023, Social Security taxes up to $160,200 of your annual wages. Since the 2022 average household income in the United States was $105,555 (while the median income was $74,580), it's safe to say that most people will probably have Social Security tax taken out of their earnings (along with those who pay taxes on their Social Security benefits).

How old you are when you retire

Again, note the Social Security Administration needs 35 years' worth of data in order to create its calculations. This means, at a minimum, you'd need to work for at least 35 years. Yet, even once you hit that total, it can still pay to delay accepting your retirement benefits. For instance, even though an insured worker technically becomes eligible for retirement benefits when they reach 62, they could lose up to 30% of their Social Security benefits by choosing to do so. Choosing to retire early can also be detrimental to total benefits amounts.

As the silver tsunami (those born between 1946 and 1964) reaches retirement age, there is increased pressure on programs like Medicare and Social Security to pay benefits. This has led to an increase in incentives for delaying retirement. Also, at age 70, people who have delayed their retirement get an 8% bonus for each year they delayed claiming, though 70 is effectively where you can max out since your benefits will cease to increase past that age.

This annual delayed retirement credit percentage can vary quite a bit depending on when you were born (it currently varies from 3% to 8%). While delaying helps, ultimately the Social Security Board of Trustees still estimates that in 2041, the Trust Funds will be depleted due to longer life expectancy and falling birth rates. This can and will have profound financial implications for America's younger generations who might not receive the same benefits they pay now for current beneficiaries.