Want the maximum monthly benefit of $4,555 from Social Security? 3 things to do before retirement

The maximum monthly Social Security retirement benefit in 2023 is $4,555, but collecting a check that big probably won’t be easy.

The average benefit for retired workers in January was just $1,779.16. There are two factors keeping the average benefit so far below the maximum: the amount the average person earns over their career and the average age at which people apply for retirement benefits.

If you want to get the maximum monthly payment of $4,555 (adjusted for inflation) from Social Security when you retire, here are three things you need to do.

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1. Earn a substantial income for 35 years

Social Security is based on your earnings during your working career, so you have to earn a lot to get a lot back.

The way it works is that the Social Security Administration takes your average earnings over your 35 highest earning years, adjusted for inflation. It then uses a formula to calculate your edge from that number.

If you earn more than the maximum taxable amount for Social Security in 35 years, you will maximize the benefits. This year, anyone earning more than $160,200 will hit the maximum. You can search historical highs on the website of the social security administration.

If you haven’t maxed out your Social Security earnings in 35 years, you still have some work to do before you can retire and receive the maximum benefit.

2. Defer benefits until age 70

Each year, you delay your benefits beyond full retirement age, you accumulate deferred retirement bonuses. These credits are capped at 70 years.

Most readers will have a full retirement age of 67. Each year you delay beyond your full retirement age, earn an 8% increase in monthly benefits. So if you delay until age 70, you will receive 124% of your full retirement pension.

A person turning 70 in 2023 will receive 132% of their full retirement pension, as the full retirement age was 66. However, anyone born in 1960 or later only gets up to three years of deferred retirement credits.

3. Save for retirement yourself

Even if you plan to receive the maximum monthly benefit of $4,555 from Social Security, you should save for your retirement on your own.

A plan to work for at least 35 years in a well-paying company and retire at 70 is all well and good, but there’s no guarantee that you’ll be able to continue working until you’re 70. You could face a sudden layoff, or your health may deteriorate to the point where you are no longer able to do the job. Maybe you don’t want to work until you’re 70.

Plus, you may find that even $4,555 isn’t enough to live on in retirement. After all, it’s less than $55,000 a year. If you have big plans for traveling and eating well, this might not be enough.

In this case, you’ll need another retirement savings to make sure you have enough money to cover the gap until you turn 70. Use a tax-advantaged retirement account as a IRA or 401(k) may be your best option. But any type of brokerage account that you can regularly invest money in should do the trick.

It’s worth pointing out that dipping into your retirement savings and delaying your Social Security benefits for as long as possible usually amounts to maximize your portfolio And minimize your taxes. After all, you can look to your future Social Security benefits as another asset in your retirement that will produce cash flow, so why not take the guaranteed return offered by delaying?

If you have a long and successful career, you are likely to receive a significant Social Security check. You might even be able to receive the maximum benefits. But don’t let that stop you from making a backup plan to make sure you can enjoy your retirement on your terms.

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