The lucky few who started receiving Social Security in 2023 at this year's maximum of $4,555 per month are about to get upstaged. People who retire with the program's maximum benefit in 2024 will be taking home a whopping $4,873 per month.
Of course, the news isn't all bad for those who were at the top of the heap in 2023. Their benefits will increase from $4,555 per month to $4,700 per month, thanks to Social Security's annual cost-of-living adjustment.
Everyone already receiving Social Security benefits will see benefits in 2024 that will be boosted by the program's 3.2% cost-of-living adjustment. Those who begin taking Social Security in 2024 will receive benefits that are based on their age, income record, and Social Security's annual wage-based adjustment process.
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Why this matters
Each person's Social Security benefit is based on a small handful of factors. Some, such as the age at which you start collecting and the total income that you earn over your career, are somewhat in your control. You don't have quite as much influence over other factors, such as the specific inflation and wage adjustments that Social Security uses to fine-tune the benefit levels each year.
As long as you're under age 70 and haven't yet started collecting benefits, chances are that there's at least one adjustment you can make that can help you boost the amount you'll take home from Social Security. By understanding the factors that you can directly impact, you could potentially get more out of the program.
What you can do about it
There are three key items that most people can adjust, at least to some extent, that go into their personal Social Security benefit amount:
- The age at which they start collecting
- The number of years they work at covered jobs
- The amount of salary they earn in each of those years
When it comes to the age at which you start collecting, you can choose any age from 62 on up. Between 62 and 70, the longer you wait, the bigger each monthly check will be, but the fewer total months you'll receive benefit checks throughout your life. That trade-off is designed to provide flexibility around a retiree's total financial picture while keeping the typical lifetime benefit roughly the same, regardless of the age at which a person starts to collect.
As for the number of years you work, Social Security bases your benefit on your highest 35 years of adjusted, covered earnings. While most jobs in the U.S. are covered, there are some -- notably state employees covered by a sufficient alternative retirement program -- that are not.
If you have fewer than 35 years of earnings, Social Security will use $0 as your earnings for the years when you had no income. If you have more than 35 years, Social Security will use your highest 35 years of earnings -- adjusted for things like the average wage level overall for the year -- to determine your benefit. As a result, putting in a few more years of work -- if you can improve on some of those low- or no-income years -- can also improve your benefit amount.
Finally, there's the salary you earn during those working years. Whether your income comes from your base salary, overtime hours, bonuses, or a side hustle, every dollar you earn from a covered job -- up to the annual cap -- will go toward your benefit calculation. In 2023, that limit is $160,200, while in 2024, it will increase to $168,600.
Get started now
Whether it comes from working more years, earning more in each future year you work, or waiting until you're closer to 70 years old to collect, it takes years of effort to make a major change in your benefit. That makes today the absolute best time to get started on your plan. By getting things in place now, you can still make some impact to this year, while also setting yourself up to start 2024 on a path to a financially stronger future.
