The most you can get from Social Security in 2024 is $4,873 a month — but what does it take to get there?
The absolute maximum Social Security benefit in 2024 is $4,873 monthly, more than double the estimated average of $1,907 retirees receive across the nation as of January.
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The max benefit amounts to $58,476 annually. Unfortunately, this is a sum of money few Americans will receive in their retirement checks this year.
Let's take a look at how Social Security retirement benefits are calculated and why it's so hard to reach the upper limit.
How is the maximum Social Security benefit calculated?
Social Security's formula bases benefit amounts primarily on two factors: average earnings — up to a certain amount — over a worker's 35 highest-income years and the age they claim benefits.
Each year, workers pay taxes on income up to a specific amount, called the wage base limit. In 2024, the limit is $168,600 annually, however, limits increase over time based on wage growth. Earnings up to the limit become part of a worker's earnings record.
That earnings record is used to calculate their average indexed monthly earnings (AIME) which is their average monthly wage in their 35 highest-income years after adjusting earnings to account for wage growth. Calculating a worker's AIME is key to determining their primary insurance amount, which sets their monthly retirement benefit at full retirement age.
A worker's full retirement age is based on their date of birth. For those born between 1943 and 1954, the age is 66 and increases gradually for those born in subsequent years until 1960, after which the full retirement age is 67.
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So, the maximum benefit ends up being based on how high the wage base limit was over a worker's 35 highest-income years. And it's available only to those who earned the maximum countable earnings.
But that's not all. The age at which a worker begins claiming benefits is also a major factor.
Claiming age impacts benefits too
Retirees can file for Social Security as early as age 62, but will incur a penalty of up to 30% of the amount they would receive at full retirement age. It's also possible to boost one's benefit even further if they delay claiming benefits past full retirement age until they're 70. And that is how to achieve the maximum benefit of $4,873 in 2024.
Experts generally advise retirees to wait until they're 70 to claim retirement benefits in order to get the most out of Social Security, if they can afford to do so. Until then, however, they would have to rely primarily on their savings, including what's in their 401(k)s and IRAs, to get by.
Benefits also increase over time as a result of cost-of-living adjustments (COLAs). These are periodic raises retirees get to account for the impact of inflation. Someone who received the maximum monthly benefit of $4,555 in 2023, for example, would receive a monthly benefit of $4,700 in 2024 since retirees received a 3.2% raise this year.
Retirees need COLAs to avoid losing buying power as prices go up. Fortunately, they're built into the program and happen automatically.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
