Claiming Social Security at 70 instead of full retirement age (67) boosts monthly checks by 24%, but only those earning above $184,500 annually qualify for the $5,181 maximum.
Social Security calculates benefits using your 35 highest-paid years, so you must exceed the wage cap for all 35 years to earn the maximum payout.
Delaying Social Security past full retirement age pays off for nearly all retirees, adding 8% per year to monthly checks for life.
Read More: Learn 7 ways to generate income with a $1,000,000+ portfolio (sponsor)
The average monthly Social Security benefit among retirees today is about $2,086. That amounts to roughly $25,000 a year, which is hard to live on.
But some retirees are eligible for $5,181 a month in Social Security. And on an annual basis, that's more like $62,000 a year, which could actually make for a decently comfortable lifestyle.
But most Social Security recipients are not eligible for $5,181 a month. There's a reason for that.
To qualify for Social Security's maximum benefit of $5,181, you need to delay your claim until age 70. Most recipients don't do that.
Social Security benefits can be claimed starting at age 62. And you're eligible for your monthly benefits without a reduction once you reach full retirement age (FRA), which is 67 if you were born in 1960 or later. Each year your claim is delayed past FRA boosts your monthly checks by 8%, up until age 70.
For many seniors, waiting until age 70 to claim benefits just isn't feasible. A lot of people end up retiring sooner due to health issues, job loss, or the need to be a caregiver to a loved one. That's part of the reason Social Security's maximum benefit is out of reach for most recipients.
It's also important to understand that waiting until age 70 to claim Social Security isn't enough to score $5,181 per month. That maximum only applies to people who satisfy the program's highest benefit requirements.
If you've saved over $1,000,000, this guide is for you. The last thing you want in retirement is to run out of money, you want your money to generate lasting income while you enjoy your life.
Now you can learn the strategies wealthy retirees use to fund their retirement with The Definitive Guide to Retirement Income from Fisher Investments. Download the guide today! (sponsor)
Someone with average or modest wages won't qualify for Social Security's maximum benefit. To get it, you need annual wages equal to or higher than the program's wage cap, which changes yearly and is currently $184,500.
Also, Social Security calculates your monthly benefits based on your 35 highest-paid years of wages. What this means is that you need your income to match or exceed the program's wage cap for a full 35 years in order to qualify for the largest benefit payment possible.
If you earn a super-high salary for 30 years but a lower wage for five years, you won't get the maximum benefit. And you don't get credit for wages beyond the annual cap in your benefits formula. So if you earn $500,000 a year for 30 years and $40,000 a year for five years, that maximum benefit may still be out of reach.
Getting Social Security's top benefit means earning a high salary throughout your career and having the ability and patience to wait until age 70 to file. For the typical retiree, that's not attainable.
But even if your wages aren't high enough to get Social Security's maximum benefit, there's a valuable lesson here -- waiting past FRA to file could still pay off big time. Even if you're only eligible for half of Social Security's maximum benefit, filing at 70 instead of 67 boosts that monthly check by 8% for life.
So if you don't need to file for Social Security right away, hold off until 70, or as long as you can. The upside could be substantial and make a big difference in your retirement finances on a long-term basis.
If you've saved over $1,000,000, this guide is for you. The last thing you want in retirement is to run out of money, you want your money to generate lasting income while you enjoy your life.
Now you can learn the strategies wealthy retirees use to fund their retirement with The Definitive Guide to Retirement Income from Fisher Investments. Download the guide today! (sponsor)
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