Social Security benefits play a significant role in the average person’s financial picture, despite the fact that they never intended to completely replace retirement income.
The Social Security Administration estimates that its monthly payments to retirees represent roughly 40 percent of the pre-retirement wages of workers with a median income. This proportion is greater among retirees who earned less during their working years, and it is lower among those who earned more.
Who Gets Full Social Security Payment?
When it comes time to start drawing, the more you put into the pool, the more you receive back. But how do you ensure that the maximum monthly payout for this year is $4,555? Here is a look at the prerequisites.
It is not easy to qualify for the maximum Social Security benefit. To obtain $4,555 per month, you must:
- Beginning benefits in 2023 at age 70. The maximum benefit is $2,572 for those who retire at age 62, the eligibility age for benefits. The maximum benefit is $3,627 for those who begin receiving benefits at the full retirement age of 67
- Minimum of 35 years of service.
- For Social Security, you need to work for at least 35 years and earn at least the maximum taxable income (6.2% of your income) to avoid paying the full 6.2% tax.
Most retirees will have the most trouble fulfilling the third requirement.
Those who don’t have access to a pension plan or who may not have been able to save much for retirement on their own can rely on Social Security to ensure a steady income in their golden years. Retirement payments from Social Security are typically proportional to the amount of taxes paid into the system by eligible workers.
Therefore, the amount of money anyone can be taxed for Social Security purposes is capped, just as the amount of money anyone can collect in retirement is capped. For 2022, only the first $147,000 of earnings were subject to Social Security tax; this threshold will increase to $160,200 in 2023.
The agency does not unfairly tax you on earnings in excess of these numbers because they would not increase your eventual monthly payment, although ordinary income tax rates do increase when compensation reaches these levels.
However, you should be aware that in order to receive the maximum benefits now, you would have had to maintain this level of relatively high income for at least 35 years. In 2012, the Social Security Administration taxed income up to $110,000. This sum was quite a lot of money back in 1992 when it was first introduced (55,000). In 1982, the Social Security tax cap was set at $32,400 of income.
Read more: SSI and SSDI payments: What additional benefits of up to $1,000 you could receive this year?
Payroll Tax Limit
Know that while you do need to have worked for at least 35 years to receive the maximum monthly benefit of $4,555 from Social Security at this time, you do not need to have worked for the same employer for those 35 years.
For purposes of calculating your retirement benefits, the Social Security Administration needs only consider the 35 highest-paying years of your working life, regardless of when you actually worked them. The following table shows the maximum Social Security taxed since 1973:
| Year | Earnings | Year | Earnings |
| 1973 | $10,800 | 1999 | $72,600 |
| 1974 | $13,200 | 2000 | $76,200 |
| 1975 | $14,100 | 2001 | $80,400 |
| 1976 | $15,300 | 2002 | $84,900 |
| 1977 | $16,500 | 2003 | $87,000 |
| 1978 | $17,700 | 2004 | $87,900 |
| 1979 | $22,900 | 2005 | $90,000 |
| 1980 | $25,900 | 2006 | $94,200 |
| 1981 | $29,700 | 2007 | $97,500 |
| 1982 | $32,400 | 2008 | $102,000 |
| 1983 | $35,700 | 2009 | $106,800 |
| 1984 | $37,800 | 2010 | $106,800 |
| 1985 | $39,600 | 2011 | $106,800 |
| 1986 | $42,000 | 2012 | $110,100 |
| 1987 | $43,800 | 2013 | $113,700 |
| 1988 | $45,000 | 2014 | $117,000 |
| 1989 | $48,000 | 2015 | $118,500 |
| 1990 | $51,300 | 2016 | $118,500 |
| 1991 | $53,400 | 2017 | $127,200 |
| 1992 | $55,500 | 2018 | $128,400 |
| 1993 | $57,600 | 2019 | $132,900 |
| 1994 | $60,600 | 2020 | $137,700 |
| 1995 | $61,200 | 2021 | $142,800 |
| 1996 | $62,700 | 2022 | $147,000 |
| 1997 | $65,400 | 2023 | $160,200 |
| 1998 | $68,400 |
Read more: Why Social Security for women is smaller than for men? Here is the reason!