Social Security was never supposed to be your sole source of retirement income. Indeed, for disciplined investors, Social Security won’t even be their biggest single source of income in retirement. If you can maximize the benefit of a program you’re required to participate in, though, you may as well do so.
To this end, here’s a closer look at the kind of money you need to be making if you want to have any shot at earning the maximum Social Security retirement benefit of $4,873 per month.
There’s more to it than a number, but the number is $168,600
There are actually three components to determining your Social Security benefit. In addition to your yearly wages, your age at the time you claim retirement benefits and the number of years you’ve worked are also factors. Simply earning an above-average wage won’t do the trick.
To the extent a specific number matters to you right now though, you’ll need to earn $168,600 (or more) this year if you’re looking to bank the equivalent of this year’s maximum benefit of $4,873 at some point the future.
This wasn’t always the number, for the record. For instance, in 2023 the maximum proportion of your wages taxed for Social Security purposes was $160,200. The year before that, it was $147,000. Thirty years ago the Social Security Administration stopped taking out Social Security taxes once your wages reached $60,600. It’s inched upward since the program’s launch in 1937 to support ever-rising benefit payouts stemming from inflation. As long as you earned as much as the limit (or more) every year for enough years (more on this below), you’ll qualify for the max monthly benefit.
| Year | Maximum Taxable Earnings (for Social Security Purposes) | Year | Maximum Taxable Earnings (for Social Security Purposes) |
|---|---|---|---|
| 1985 | $39,600 | 2005 | $90,000 |
| 1986 | $42,000 | 2006 | $94,200 |
| 1987 | $43,800 | 2007 | $97,500 |
| 1988 | $45,000 | 2008 | $102,000 |
| 1989 | $48,000 | 2009 | $106,800 |
| 1990 | $51,300 | 2010 | $106,800 |
| 1991 | $53,400 | 2011 | $106,800 |
| 1992 | $55,500 | 2012 | $110,100 |
| 1993 | $57,600 | 2013 | $113,700 |
| 1994 | $60,600 | 2014 | $117,000 |
| 1995 | $61,200 | 2015 | $118,500 |
| 1996 | $62,700 | 2016 | $118,500 |
| 1997 | $65,400 | 2017 | $127,200 |
| 1998 | $68,400 | 2018 | $128,400 |
| 1999 | $72,600 | 2019 | $132,900 |
| 2000 | $76,200 | 2020 | $137,700 |
| 2001 | $80,400 | 2021 | $142,800 |
| 2002 | $84,900 | 2022 | $147,000 |
| 2003 | $87,000 | 2023 | $160,200 |
| 2004 | $87,900 | 2024 | $168,600 |
Data source: Social Security Administration.
Beyond your earnings, you must also work at least 35 years because the Social Security Administration considers your 35 highest-earning years when calculating your benefit. If you work only 30 years, for example, the formula assigns you an earnings figure of $0 for those missing years.
Earning such a high income for at least 35 years is already hard enough, but there’s still another requirement before you qualify for the maximum Social Security benefit: You must wait until 70 to claim. Your full retirement age (FRA) may fall between the ages 65 and 67 (depending on when you were born), but the delayed retirement credits you earn by waiting beyond FRA to claim Social Security are necessary too. As a result, you must wait until those credits max out at age 70 to collect your benefits.
You can do better just by mapping out a plan
If you’re nowhere near any of these numbers, don’t sweat it — most people aren’t. The Social Security Administration says this year’s average retirement benefit is a much lower $1,907 per month.
The thing is, you can actually set yourself up for even more retirement income than Social Security offers you without earning anywhere near the taxable earnings laid out on the table above. Let’s just work through a hypothetical example.
Given the current interest rate environment, it’s possible to earn a reliable 5% on your money every year. This will realistically include a combination of interest earned on fixed income instruments (like bonds) as well as stock dividends, and the amount earned may vary a bit from one year to the next. But an annualized figure of 5% is a fair starting figure to work with.
To make that rate of return generate, say, $2,000 worth of income per month, you’ll need roughly half a million dollars.
The question then becomes a simple one: How do you save up half a million dollars? Assuming the stock market’s average historical return of 10% per year remains in place for the foreseeable future, setting aside $3,000 per year for 30 consecutive years will do the trick. If you’ve only got 25 years to work with, you’ll need to invest $4,500 every year. If there’s only 20 years between now and when you’ll need to start living off of your savings, you’ll have to come up with an extra $8,000 per year to put into the market.
These are just rough numbers, of course, meant to help you loosely map out what you’ll need to invest on your own in order to supplement or even supplant your Social Security retirement benefits. If you need to earn on the order of $4,000 per month in the future, you’ll need to double the amount of savings suggested above.
Still, even if you’re not earning enough money to reach Social Security’s taxable income cap in any year, you can do better for yourself than you might by relying on Social Security alone. The key is getting started and building your nest egg up over time, even if that means making a few spending sacrifices.