What Is the Maximum Social Security Benefit I Can Receive?

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If you’re working on your retirement plan, you might be wondering about the maximum monthly benefit you can receive from Social Security.

You probably know Social Security is based on your lifetime earnings, but there are limits to how much is taken out, and in turn, paid to you once you retire. Plus, if you wait until you’re 70 to retire, the maximum benefit you’re eligible for is higher.

In short, the maximum level of earnings subject to Social Security tax is $142,800 for 2021 (up from $137,700 for 2020). It typically increases every year to adjust for the cost of living. If you had earned the maximum amount for every year since you were 22, and you waited until 70 to retire, the maximum you could begin collecting in 2021 would be $3,895 a month, according to the Social Security Administration (SSA).

Since everyone’s calculation is different, there’s little value in these numbers unless you know some basics about Social Security. Here’s a quick primer on how it works.

How Social Security Is Calculated

As you know, your paycheck doesn’t all go to you. A percentage of your wages is taken out for federal and state income taxes, and then there’s your contribution to Social Security.

For 2021, the tax rate has been set at 12.4%, up to the maximum taxable amount. So the contribution is limited to $17,707 (12.4% of $142,800) whether your earnings are $142,800 or any amount higher. You pay 6.2%, and your employer pays 6.2% out of their pocket. Or, if you’re self-employed, you’re on the hook for the entire 12.4%.

Once you’re ready to retire, you’ll receive a monthly benefit roughly based on your lifetime of earnings. The further away you are from retirement, the harder the forecast is to make, but the SSA’s website has a variety of calculators you can use to estimate your benefit.

The calculators are only as good as your estimate of income and the rules of the program as they stand now. The laws may change, the SSA warns, because reserves are expected to be depleted by 2035. Taxes collected will only cover about 80% of scheduled benefits.

In essence, Social Security looks at your 35 highest-earning years, adjusts for inflation and changes in wage levels, and then applies a formula. If you have worked more than 35 years, the lowest amounts are dropped. If you have worked less than 35 years, you get a zero averaged in for the remaining years.

This means that the longer you work, the bigger your benefits check will be, even though you usually only have to work 10 years to be eligible for Social Security. In other words, you want to avoid having 25 years of zeros in your calculation.

Maximum Benefits Depend on Retirement Age

If you want to receive the maximum benefit, two things have to happen. You must earn the maximum allowable for 35 years, and you must wait until you’re 70 to begin receiving benefits.

If you did both those things and started collecting next year, you’d get the $3,895 per month we mentioned above. If you earned the maximum for 35 years and retired at your full retirement age (age 66 in this example), you’d get $3,113 per month. And if you started claiming benefits as soon as you could—age 62—you’d get $2,324 per month.

Many people won’t qualify for the maximum benefit because earning the maximum taxable income for 35 years is no easy task. You may eventually reach the threshold, but it could take decades.

Remember, too, that the Social Security program is designed to reflect changes in the standard of living, so the maximum taxable amount is likely to increase. In 2020, it was $137,700, and just five years ago, $118,500. In 2021, the maximum is $142,800.

Similarly, the benefit amount is automatically adjusted for cost of living increases. If someone under our best-case scenario retired in 2010 at age 70, for instance, they initially received $3,119 a month. In 2020, that same person will get $3,895 a month.

Bottom Line

If you’re close to retirement and your annual earnings have tended to increase, it may make sense to work a few extra years—not only so you can retire at 70 instead of earlier, but so you can benefit from the higher-earning years. And if you’re still young, start planning early. You may want to work with a financial planner to assess how to maximize your benefits and consider options for supplementing your retirement savings.