3 steps to claim up to $4,555 per month in Social Security benefits | The Motley Fool

Social Security is not intended to be your sole source of income in retirement. But for a few people, it can be a significant problem. A few lucky retirees are cashing monthly checks of up to $4,555.

How did they do it? And how can you do the same? Here’s an overview of three key things they did differently than many other companies indicates. Even if you can’t exactly agree with their views, getting as close to them as possible can make your final Social Security check closer to theirs.

1. Work for 35 calendar (tax) years.

There is no getting around this. If he wants to claim benefits and make a take-home pay of $4,555 a month, he absolutely has to work for at least 35 years. That’s because the Social Security Administration’s calculation of retirement benefits is based on the 35 years in which he earned the most, based on his declared taxable income. Even though he has been well paid for 34 years, he will not be able to receive the maximum amount of Social Security benefits.

That being said, there are details here that need to be explained. This means that working beyond 35 years doesn’t necessarily mean you’ll get additional benefits by earning wages and paying FICA (Federal Insurance Contributions Act) taxes over a longer period of time. Once the Social Security Administration identifies the best 35 inflation-adjusted years, it stops counting altogether.

A photo of a pre-retirement couple considering financial planning.

Image source: Getty Images.

And this is also an important detail to bring out. Past earnings are adjusted for inflation to figure out exactly which of the past 35 years are truly the best years. After all, a salary that was considered high in 1993 probably won’t be that high in 2023 dollars.

On that point…

2. Earn the equivalent of $160,200 in 2023, adjusted for inflation.

Did you know that there is a cap on the amount of income that can be taxed for Social Security purposes? Of course, any FICA taxes you pay in excess of that amount will not be deducted. That’s because, in the same sense that there’s a cap on future monthly payments, there’s also a limit on how much of your earnings can go into a fund in your name. This year, Social Security will stop deducting money from your paycheck if your income from work exceeds $160,200.

The ceiling was never high. Like Social Security payments themselves and wages and all other costs, this cap is periodically adjusted for inflation. Last year it was $147,000. In 2000, his tax limit was $76,200. In 1980 it was $25,900. I understand. If you’re looking for $4,555 a month in retirement income now, you’ll need to reach that income cap for at least 35 years and maximize your contributions to the pool during those years.

3. Don’t claim benefits until you’re 70 years old

Last but not least, your official full retirement age is 66 or 67 (depending on when you were born), but even if you wait until then to start collecting benefits, you’ll still receive a monthly check of $4,555. cannot be received. The maximum a 66-year-old retiree can start making monthly payments this year is her $3,627. The only retirees who received the highest possible benefits were those who waited until age 70 to claim benefits.

Why? please think about it. They argue that people who claim retirement benefits three to four years earlier than those at age 70 will end up drawing from the Social Security pool for an additional three to four years. While the Centers for Disease Control reports life expectancy in the United States as 76.4 years, the most common age of death for people reaching old age is — incredibly — well beyond the late 80s. , the Social Security Administration will need to adjust benefits. Be sustainable and fair.

Doing something is always better than doing nothing

If you know you won’t qualify for the maximum monthly benefit, don’t worry. Most people don’t, just like most people who are already retired don’t. This year’s average monthly Social Security check is a much more modest $1,827. However, just because you won’t receive the largest possible Social Security payment doesn’t mean you shouldn’t try to maximize your bottom line.

It also doesn’t mean you can’t build a healthy nest egg for yourself without receiving full Social Security. Start with a personal retirement account, and once you have more savings, invest for your future with a regular brokerage account. You may find that these savings ultimately provide you with even more income than Social Security.

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