2 To be eligible to receive the maximum benefit, you need to earn Social Security's maximum taxable income for 35 years. The cap, which is the amount of earnings subject to Social Security tax, is $147,000 in 2022, up from $142,800 in 2021.
Here's how much your Social Security benefits will be if you make anywhere from $30,000 to $100,000 per year. The average Social Security benefit is around $1,544. With inflation on the rise, retirees are expected to get as much as a 6% cost-of-living increase in their 2022 checks to shore up their budgets.
That adds up to $2,096.48 as a monthly benefit if you retire at full retirement age. Put another way, Social Security will replace about 42% of your past $60,000 salary. That's a lot better than the roughly 26% figure for those making $120,000 per year.
If you make $120,000, here's your calculated monthly benefit
According to the Social Security benefit formula in the previous section, this would produce an initial monthly benefit of $2,920 at full retirement age.
How much you can expect to get from Social Security if you make $75,000 a year. The first monthly Social Security check was cashed in 1940 for a grand total of about $23. Fast forward to 2019, and the average retired worker gets almost $1,500 a month from Social Security.
For example, the AARP calculator estimates that a person born on Jan. 1, 1960, who has averaged a $50,000 annual income would get a monthly benefit of $1,338 if they file for Social Security at 62, $1,911 at full retirement age (in this case, 67), or $2,370 at 70.
Those who make $40,000 pay taxes on all of their income into the Social Security system. It takes more than three times that amount to max out your Social Security payroll taxes. The current tax rate is 6.2%, so you can expect to see $2,480 go directly from your paycheck toward Social Security.
Average Indexed Monthly Earnings (AIME)
Up to 35 years of earnings are needed to compute average indexed monthly earnings. After we determine the number of years, we choose those years with the highest indexed earnings, sum such indexed earnings, and divide the total amount by the total number of months in those years.
While it's true that the last 3 years you work may affect your Social Security benefit amount when you claim, those years alone are not what determine your benefit dollar amount. Rather, your benefit is determined using a formula, which includes the highest earning 35 years of your lifetime working career.
In 2022, if you're under full retirement age, the annual earnings limit is $19,560. If you will reach full retirement age in 2022, the limit on your earnings for the months before full retirement age is $51,960.
The short answer is yes. Retirees who begin collecting Social Security at 62 instead of at the full retirement age (67 for those born in 1960 or later) can expect their monthly benefits to be 30% lower. So, delaying claiming until 67 will result in a larger monthly check.
You can get Social Security retirement or survivors benefits and work at the same time. But, if you're younger than full retirement age, and earn more than certain amounts, your benefits will be reduced.
Once you have turned your full retirement age, there is no limit on how much you can earn while collecting Social Security payments.
But if you can supplement your retirement income with other savings or sources of income, then $6,000 a month could be a good starting point for a comfortable retirement.
According to the SSA's 2021 Annual Statistical Supplement, the monthly benefit amount for retired workers claiming benefits at age 62 earning the average wage was $1,480 per month for the worker alone. The benefit amount for workers with spouses claiming benefits was $2,170 at age 62.
You can see that Social Security represents only a small portion of a high-income worker's pay. Those making $125,000 a year will get less than 30% of their pre-retirement income replaced by Social Security.
Consistently Earn a High Salary
You will need to maintain a high income throughout your career to qualify for large Social Security payments in retirement. In recent years, you need to earn a six-figure salary to get a top Social Security payment. The maximum wage taxable by Social Security is $147,000 in 2022.
At age 65: $2,993. At age 66: $3,240. At age 70: $4,194.
The Social Security Administration (SSA) defines “enough work” as earning 40 Social Security credits. More specifically, in 2022, an individual receives one credit for each $1,510 in income, and they can earn a maximum of four credits per year. So, 40 credits are roughly equal to 10 years of work.
Can you retire on $500K plus Social Security? It's possible. But it'll require you to optimize your budget, investment returns, Social Security retirement benefits, and also coordinate a retirement income spending plan that minimizes taxes.
For 2022 that limit is $19,560. In the year you reach full retirement age, we deduct $1 in benefits for every $3 you earn above a different limit, but we only count earnings before the month you reach your full retirement age.
When you reach your full retirement age, you can work and earn as much as you want and still get your full Social Security benefit payment. If you're younger than full retirement age and if your earnings exceed certain dollar amounts, some of your benefit payments during the year will be withheld.