It is not a little sum, yet many individuals cannot afford it.
In December, seniors receiving Social Security received good news. In 2023, their benefits will get a cost-of-living adjustment (COLA) of 8.7% due to soaring inflation levels. This is the highest increase seen in decades.
Due to this COLA, the maximum monthly Social Security payment payable to seniors in 2023 is $4,555. Clearly, that is not a small amount of money.
But will you qualify for such a substantial benefit? Most likely not. And that’s perfectly fine.
A difficult figure to obtain
To receive the highest Social Security payment, you must complete the following:
- At least 35 years of work
- Earn an annual income that is equal to or greater than the pay cap for at least 35 years.
- Delay applying for Social Security until age 70
The calculation of your Social Security benefits is based on your 35 highest-paid years in the labor force. And each year, a pay cap is imposed that determines how much income is subject to Social Security taxation.
This year’s salary cap is set at $147,000. Next year, it will reach $160,200. To receive the maximum monthly payment from Social Security, you must make sufficient income for 35 years to meet or exceed the wage cap.
Lastly, if you wish to receive the maximum Social Security payout, you must delay your application until age 70. This will increase your benefit, maybe bringing it to $4,555.
You may be able to work for 35 years, and it may be rather simple for you to exercise patience and wait to file for Social Security until your 70th birthday. However, earning enough to qualify for the maximum monthly benefit is a different issue. For this reason alone, a $4,555-per-month salary may not be feasible for you.
Don’t fret if you are unable to claim the maximum advantage.
The majority of seniors do not receive the maximum Social Security income. In fact, it is anticipated that the average monthly benefit will be $1,827 in 2023, which is considerably less than $4,555.
Instead of focusing on obtaining the highest Social Security payment, you should work to increase your benefit. This could need delaying your tax file and battling for raises throughout your career to increase your income. Taking on a second job and increasing your earnings could position you for a larger Social Security benefit in the future.
Even if you are eligible for the full monthly amount, it is often unwise to rely solely on Social Security to fund your retirement. Either through establishing an IRA or by contributing to an employer-sponsored 401(k), strive to amass a substantial nest egg for yourself (k).
If you retire with a $1 million nest egg and a Social Security income of $2,000 a month, you should be in pretty good financial shape, even if you do not receive the maximum monthly benefit.