The Social Security Administration (SSA) uses a formula to figure out how much money beneficiaries get each month. To get the most, you need to have a certain salary. So even though there’s been a cost of living adjustment (COLA) this year, that doesn’t mean everyone is getting the same.
So, What Does This Social Security Formula Look Like?
Easy. Let’s break it down. The formula used by the SSA is made up of two parts. First, they look at how many years you worked. In addition to that, they also look at how much money you made during those years. Your benefit amount is calculated when the SSA looks at the average amount of money you earned during your 35 highest-paid working years. So, at the very least, you need to have worked for 35 years. If there are years that you didn’t work, or if you worked under 35 years, your social security benefit amount will be lower.
In order to be eligible for maximum benefits, you must have made a certain amount of money each year. Your income would have to exceed or at least meet the SSA limit for taxable income. For this year, the salary needed to reach maximum benefits is $147,000. Basically, that means that you must’ve earned an average of $147,000 or more per year for your 35 highest-earning years. For those that didn’t meet those income requirements, there’s still hope for a bigger benefit amount. Other jobs or side jobs can help boost social security benefits, according to The Sun.
All Benefits Go Up Thanks To COLA and Inflation
For a lot of seniors living in the U.S., social security benefits are their main source of income. As a matter of fact, nine out of 10 Americans that are 65 or older get some amount of benefits each month. Overall, it accounts for 33% of their income. As such, sometimes there’s a cost of living adjustments to help keep seniors afloat. In fact, social security benefits got a whopping 5.9% COLA increase this year. That means that maximum benefits have increased.
In 2022, the absolute max for benefits is $4,194. Of course, many people receive less money than that. To get the maximum amount of benefits this year, you must retire at 70. Additionally, you must meet all of the requirements mentioned above. The amount of benefits you could receive this year goes down to $2,364 if you retire at 62. The social security benefit amount for those that wait until the full retirement age is somewhere in the middle. If you wait until you’re 65 or at your retirement age, the maximum monthly amount is $3,345.
It goes without saying that the longer you wait, the more money you’ll be able to get later on.