Most retirees need as much income from Social Security as they can get. That's what makes Social Security's maximum benefit so appealing: The prospect of getting the largest possible monthly benefit check from Social Security seems like an obvious solution to retirees' financial worries. Unfortunately, getting the maximum amount that Social Security will pay takes a lot of effort, and almost no one will be able to hit that theoretical maximum amount. Below, we'll look at Social Security's maximum benefit and why most people will inevitably fall short of receiving it.
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What Social Security's maximum benefit is
Each year, the Social Security Administration announces the maximum monthly Social Security benefit that's available to retirees. For 2017, the maximum benefit for someone retiring at full retirement age will be $2,687 per month. That's up by $48, or 1.8%, from 2016's maximum benefit of $2,639 per month. On an annual basis, that amount will produce nearly $32,250 in income in 2017.
However, one thing that affects the true maximum benefit from Social Security is the age at which you decide to file for benefits. The amount above assumes that you take benefits at full retirement age, which is 66 for those who were born in 1951 and are retiring in 2017. If you claim your benefits earlier than that, then you'll get less. For instance, if you claim benefits at the earliest possible age of 62 in 2017, then your maximum possible benefit would be $2,153 per month -- about a fifth less than the full-retirement-age maximum. On the other hand, if you turn 70 in 2017 and take benefits, then your maximum is much higher at $3,538 per month.
RELATED: The 25 best cities for stretching your retirement nest egg:
Best cities for stretching your retirement nest egg
Best cities for stretching your retirement nest egg
25. Orlando, Fla.
Annual healthcare services: $6,126.37
Annual taxes: $3,651.94
Annual utilities: $3,886.59
Annual housing: $8,780.50
Overall cost of living: $46,696.15
Located in one of the best states to retire in the U.S., Orlando offers a potential benefit for retirees: Your kids and grandchildren might visit you more often so they can go to Walt Disney World, Universal Studios Florida and SeaWorld Orlando. When your kids are looking to knock out two birds with one stone — take their children on vacation and visit you at the same time — Orlando could be the perfect lure.
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24. Charlotte, N.C.
Annual healthcare services: $6,031.32
Annual taxes: $3,595.27
Annual utilities: $3,826.29
Annual housing: $8,644.26
Overall cost of living: $45,971.63
You can make your retirement savings last in Charlotte, and you could also earn some money back on your home’s value if you decide to move again. Zillow's data shows home values have been on an upward trend over the last couple of years and predicts they will rise about 4 percent in the coming year.
If you want to move to Minnesota, consider St. Paul over other popular cities — such as Minneapolis. Not only is St. Paul less expensive than Minneapolis, according to Sperling's Best Places, but the crime rate is also lower. St. Paul also shines in terms of healthcare, having 279 physicians per 100,000 population compared to the U.S. average of 210.
22. Louisville, Ky.
Annual healthcare services: $5,954.81
Annual taxes: $3,549.67
Annual utilities: $3,777.75
Annual housing: $8,534.61
Overall cost of living: $45,388.48
Cost of living in Louisville is low compared to the U.S. average, especially when it comes to housing, according to Sperling's. And, there are 335 physicians per 100,000 population.
For retirees trying to live life on a budget, cost of living in Indianapolis is lower than the national average. To save on housing, neighborhoods outside of the I-465 loop tend to offer a balanced combination of low-cost living and lower crime rates, reports Movoto.
Annual healthcare services: $5,942.64
Annual taxes: $3,542.41
Annual utilities: $3,770.03
Annual housing: $8,517.17
Overall cost of living: $45,295.70
The population of seniors has grown considerably — 20.3 percent — in Atlanta in recent years, reports Forbes. And, it's one of the best cities in the country for a healthy and affordable retirement, offering a satisfying senior social life, access to healthcare and more, according to Sperling’s.
Annual healthcare services: $5,922.93
Annual taxes: $3,530.66
Annual utilities: $3,757.53
Annual housing: $8,488.92
Overall cost of living: $45,145.50
Houston is a booming metropolis and a good choice for making your retirement savings last. In fact, it's one of the 50 cheapest places to retire. Health costs are cheaper in Houston than the U.S. overall, according to Sperling's. The city also provides easy access to top medical facilities, including the Texas Medical Center — the world’s largest medical complex.
18. Tampa, Fla.
Annual healthcare services: $5,882.36
Annual taxes: $3,506.48
Annual utilities: $3,731.79
Annual housing: $8,430.77
Overall cost of living: $44,836.25
Tampa boasts affordable rent and cost of living expenses, including groceries, according to Numbeo data. Many suburbs around Tampa have great retiree-friendly amenities such as golf courses, libraries, volunteer activities and more, reports Movoto. And with home values on an upward trend, it could be one of the best cities to own investment property.
17. Memphis, Tenn.
Annual healthcare services: $5,838.89
Annual taxes: $3,480.57
Annual utilities: $3,704.21
Annual housing: $8,368.47
Overall cost of living: $44,504.92
Memphis is affordable, making it a great place to stretch your retirement savings. The cost of living is more than 25 percent lower than the nation's average, according to Sperling's. On a broader level, retirees will appreciate Tennessee’s total tax burden — it's one of the best states for taxes.
16. Newark, N.J.
Annual healthcare services: $5,835.41
Annual taxes: $3,478.49
Annual utilities: $3,702
Annual housing: $8,363.49
Overall cost of living: $44,478.41
Newark’s housing market could help you grow your nest egg — if you're looking to make a good investment in real estate. Home values rose by nearly 20 percent over the last year, and Zillow forecasts they will continue to rise within the next year.
15. Columbus, Ohio
Annual healthcare services: $5,820.34
Annual taxes: $3,469.51
Annual utilities: $3,692.44
Annual housing: $8,341.89
Overall cost of living: $44,363.55
Fortunately for retirees, Columbus' cost of living is lower than the U.S. average. And a little further outside the city, retirees can find affordable suburbs with high proportions of residents age 65 and up, such as Lithopolis and Canal Winchester, reports Movoto.
14. Nashville, Tenn.
Annual healthcare services: $5,808.17
Annual taxes: $3,462.26
Annual utilities: $3,684.72
Annual housing: $8,324.44
Overall cost of living: $44,270.77
If you're thinking about retiring near Nashville, consider Ridgetop, Hendersonville or Oak Hill — all three suburbs ranked among Niche's top 20 places to retire in Tennessee.
13. Bakersfield, Calif.
Annual healthcare services: $5,796
Annual taxes: $3,455
Annual utilities: $3,677
Annual housing: $8,307
Overall cost of living: $44,178.00
If you want to escape the hustle and bustle of big cities like San Francisco and Los Angeles, Bakersfield might offer refuge. Not only will your $100,000 go far in the first couple years of retirement, but another GOBankingRates.com study found it's the No. 2 city where your paycheck will stretch the furthest.
Like other cities on this list, Phoenix is experiencing a marked increase in the population of seniors, reports Forbes. Other nearby areas you might want to consider for more senior-friendly amenities — such as restaurants, retirement homes and recreation centers — include Litchfield Park, Sun City and Florence city, reports Movoto.
11. Austin, Texas
Annual healthcare services: $5,752.53
Annual taxes: $3,429.09
Annual utilities: $3,649.42
Annual housing: $8,244.70
Overall cost of living: $43,846.67
Austin saw a substantial growth in its population of senior citizens from 2010 to 2014, reports Forbes. With minimal unemployment and major job growth projected for the future, the city offers many opportunities for retirees who might want to re-enter the workforce.
Although Dallas is one of the top cities experiencing skyrocketing home prices, it's still an affordable place for retirees looking to stretch their retirement savings. The cost of living is still lower than the U.S. average, and Sperling's estimates future job growth over the next 10 years will be more than 42 percent.
9. Sioux Falls, S.D.
Annual healthcare services: $5,710.80
Annual taxes: $3,404.21
Annual utilities: $3,622.95
Annual housing: $8,184.89
Overall cost of living: $43,528.58
Your nest egg can go further in Sioux Falls. Plus, the city offers work opportunities for retirees — more than a third of people age 60 and older are employed in the city, reported U.S. News.
8. Tulsa, Okla.
Annual healthcare services: $5,662.69
Annual taxes: $3,375.54
Annual utilities: $3,592.43
Annual housing: $8,115.94
Overall cost of living: $43,161.91
The cost of living in Tulsa is about lower than the national average, according to Sperling's. And homes are pretty affordable, too. The median home listing price is $159,900, according to Zillow.
7. Madison, Wis.
Annual healthcare services: $5,660.95
Annual taxes: $3,374.50
Annual utilities: $3,591.33
Annual housing: $8,113.45
Overall cost of living: $43,148.65
In 2014, the Milken Institute ranked Madison as the No. 1 best large metro in its Best Cities for Successful Aging report, largely thanks to the city's high-quality healthcare and healthy environment.
6. Kansas City, Mo.
Annual healthcare services: $5,653.42
Annual taxes: $3,370.01
Annual utilities: $3,586.55
Annual housing: $8,102.65
Overall cost of living: $43,091.22
Low living expenses, notably on groceries, help make Kansas City one of the most affordable places to retire. Plus, buying a home in Kansas City is affordable — the median home price is only $165,000, according to Zillow.
5. Rochester, N.Y.
Annual healthcare services: $5,601.25
Annual taxes: $3,338.91
Annual utilities: $3,553.45
Annual housing: $8,027.88
Overall cost of living: $42,693.62
Saving on retirement living expenses in Rochester shouldn't be that big of a challenge. After all, the city’s cost of living is almost 18 percent cheaper than the country’s average, according to Sperling's.
4. Salt Lake City
Annual healthcare services: $5,593.72
Annual taxes: $3,334.42
Annual utilities: $3,548.67
Annual housing: $8,017.09
Overall cost of living: $42,636.19
Your retirement savings should go far in Salt Lake City. But if you prefer living in suburbs, consider these top picks from Movoto: Bountiful, which has beautiful retirement housing options, and Midvale, which might attract active retirees.
3. Albuquerque, N.M.
Annual healthcare services: $5,477.22
Annual taxes: $3,264.98
Annual utilities: $3,474.77
Annual housing: $7,850.12
Overall cost of living: $41,748.21
Albuquerque is also one of the topcities where your paycheck and retirement savings go far. And when it comes to healthcare, retirees benefit from the fact the city has 233 physicians per 100,000 population, which is higher than the U.S. average of 210.
2. Tucson, Ariz.
Annual healthcare services: $5,445.92
Annual taxes: $3,246.32
Annual utilities: $3,454.91
Annual housing: $7,805.26
Overall cost of living: $41,509.65
Nearly 18 percent of the population in Tucson are senior citizens, reports Forbes. Besides being an excellent city to stretch your retirement savings, Tucson also offers one of the cheapest rents on apartments in the U.S.
1. Oklahoma City, Okla.
Annual healthcare services: $5,425.64
Annual taxes: $3,234.23
Annual utilities: $3,442.04
Annual housing: $7,776.18
Overall cost of living: $41,355.03
Oklahoma City is one of the best cities where your $100,000 retirement savings will go far in your first couple of years in retirement. And according to another GOBankingRates.com study, you only need to make about $44,180 to live comfortably.
Methodology: Cities were ranked based on their cost of living index relative to the average annual expenditures for retirees 65 and older. In order to find the average annual expenditures for retirees 65 and older, GOBankingRates.com used data from the BLS Consumer Expenditure Survey. Cost of living indices were taken from Numbeo on Nov. 30, 2016.
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This is because the longer you wait to claim your Social Security benefits, the larger they will be. This makes sense when you think about it. If you file for Social Security early, then you'll naturally get more checks during your lifetime, and thus the Social Security Administration compensates by reducing the amount of your monthly payments.
Yet the main reason why most people don't end up getting anything close to the maximum Social Security benefit has little to do with when they retire. It's because most Americans don't earn enough money throughout their careers.
What it takes to get the most from Social Security
To understand why most people don't get the maximum benefit from Social Security, it's useful to think about what a worker has to do in order to earn the maximum. Social Security looks at the highest-earning 35 years of your work history in order to determine your benefit amount, adjusting earlier years for inflation and then coming up with your average indexed monthly earnings. From there, average monthly earnings get plugged into a formula that determines their monthly retirement benefit. Social Security is a progressive program, which means it's designed to replace more pre-retirement income for low earners and less for high earners. For example, the program will replace 90% of monthly income up to $856 but only 15% of monthly income beyond $5,157.
Social Security only gives workers credit for the amount they earn up to a certain wage cap -- which for 2017 is $127,000. That's because the Social Security payroll tax is not assessed on income above $127,000, and thus it's only fair that income above that threshold isn't factored into your benefits. For instance, if you earn $200,000 in 2017, then Social Security will treat you as if you had earned $127,000.
That means in order to qualify for Social Security's maximum benefit, must have earned at least the wage base limit for 35 years of your career. Obviously, most Americans don't earn anywhere near that amount. Even those who do currently earn that much won't qualify for the maximum benefit if they haven't earned that much for 35 full years.
The silver lining in Social Security's benefit formula
Even if you don't earn the maximum, however, there's good news for those who have high earnings. Because top earners only get $0.15 in extra monthly benefits for every dollar they earn above a certain threshold, those who earn slightly less than the maximum will only see their benefits fall by a slight amount. For example, those who turn 66 in 2017 and get the maximum amount will have average indexed monthly earnings of $8,843. However, if their monthly earnings were $100 lower, at $8,743, then they'd only get $15 less than the maximum benefit.
For most Americans, earning a salary of $127,200 or more is an unrealistic goal, and so the maximum benefit from Social Security will remain out of reach. Yet that shouldn't stop you from working toward earning as much as you can -- both to increase your retirement savings and to boost your future Social Security retirement benefit.