If you’re reading this, then you’re likely already aware that the biggest-possible monthly check retirees are receiving from Social Security this year is a respectable $4,555. But how many people are actually collecting payments of this size? Not many, actually. In fact, the average Social Security retirement payment is much more modest at around $1,700 per month.
And these numbers raise a couple of interesting questions. First, although the average monthly check is on the order of $1,700, how many people are getting significantly more or significantly less? Second, what does it take to max out your eventual Social Security retirement check anyway?
How much are retirees really bringing home?
Averages are useful information when you’re looking to get a grip on the bigger picture. Mathematical averages, though, don’t necessarily tell all the critical, detailed parts of the story. The statistical distribution of all the data points that make up the average can tell you something else that’s just as important.
That’s what the graph below does, breaking down the average monthly Social Security payment by the number of retirees collecting checks of that size.
This is where things get interesting. Although the average-sized check is right at $1,700, that’s nowhere near the size of the most commonly received payment. The most common payment is actually just a little more than $2,400 per month. There’s also a wider-than-average swath of retirees collecting right around $1,000 per month.
Data source: Social Security Administration.
Don’t get too excited about the swell of people taking home Social Security retirement checks of more than $2,600 per month, either. That sliver of retirees covers everyone from $2,600 to the $4,555 maximum and encompasses only about 14% of all payees. The further away from the middle of this spectrum curve you get, the fewer people you see cashing checks in that range. Very few people are bringing home that $4,555 maximum.
This information can be encouraging or discouraging, depending on where your payment will lie on the spectrum. Plenty of people end up doing better than average. A lot of people end up doing worse.
The question remains, however: How is anybody getting that biggest possible check?
What it takes to reach that max of $4,555
The good news is that the formula for setting yourself up for the maximum-sized monthly Social Security payment is pretty simple. The bad news is that it still takes a lot to earn it. The people who are receiving it did these three things:
1. Worked for 35 full years
When calculating your eventual benefit, the Social Security Administration bases it on your 35 (inflation-adjusted) highest-earning years. But if you can’t work for 35 whole years, that’s OK. You don’t have to. You can still retire and collect benefits. The Administration simply doesn’t give you any credit for the number of years below 35 that you didn’t work, thus reducing your total future payout.
2. Earned at least the full amount of income taxed for Social Security purposes
Believe it or not, there is a point at which Social Security stops taxing you more just because you earn more. For 2023, this threshold is $160,200. Next year, it’s $168,600. FICA taxes stop growing once your income passes this level (although income taxes don’t).
Of course, the Social Security Administration also stops giving you additional credit toward your eventual monthly benefit at that point. So, the agency should stop piling taxes on.
The thing is, you would need to meet or surpass this annually raised threshold every year for the aforementioned 35 years to bring home $4,555 worth of monthly Social Security benefits in retirement. For perspective, this threshold was $106,800 back in 2010, $80,400 in 2000, and $51,300 back in 1990 — fair amounts of money at the time.
3. Waited until age 70 to file for benefits
Finally, even if you’ve earned more than Social Security’s taxable threshold for 35 years, you still don’t inherently qualify for the maximum monthly payment of $4,555. You’ll also need to wait until you turn 70 to claim retirement benefits payments if you’re looking for the biggest checks. People filing at their full retirement age (66 or 67, depending on when you were born) this year will only be able to collect a monthly maximum of $3,627.
That doesn’t necessarily mean you have to work all the way to 70 years of age. If you’ve got the financial means to do so, you can stop working whenever you want and live off of your savings until you turn 70, and then claim your retirement benefits. Of course, for many people, this may not be a viable option.
Just part of a bigger plan
This information about how many retirees are or are not bringing home monthly Social Security payments of $4,555 — and how much they’re more likely collecting — is certainly helpful. So are the criteria for reaching the goal. Although most of us won’t earn more than any given year’s taxable ceiling, we may still be able to find a way of working 35 years, and we may still figure out a way of holding off on claiming benefits until we’re 70 years old.
Even if we make the most of our eventual Social Security benefits, though, bear in mind that this government program was never meant to fully replace your work-based income in retirement. On average, Social Security retirement benefits recipients are only seeing around 40% of their work wages in the form of benefit checks. You’ll still want to save for your retirement on your own in tax-friendly accounts like IRAs.
If you need help getting started on a complete retirement plan, you might want to start here.
