The maximum monthly benefit Social Security recipients can collect in 2024 is $4,873. But don't kid yourself -- most seniors receive a lot less money than that each month. The average retired worker, in fact, was getting just $1,915 a month as of April.
You may be eager to do what you can to chase the maximum monthly Social Security benefit. But rather than spin your wheels in that regard, you may be much better off focusing on building a solid retirement nest egg.
Social Security's maximum benefit is hard to attain
To collect the maximum amount of money Social Security will pay each month, you need to do three things:
Work at least 35 years
Earn the equivalent of the wage cap each year (this year, that cap is $168,600)
Delay your Social Security claim until age 70
You can push yourself to stay in the workforce long enough to achieve a 35-year income history. And you can also force yourself to keep working to delay your Social Security filing until your 70th birthday.
But the fact of the matter is, if you don't earn enough throughout your career to qualify for Social Security's highest monthly benefit, then you're not going to get it. It's that simple. So to some degree, chasing that maximum benefit could end up being a serious waste of your time and energy.
Focus on the things you can control
Your employers, through the years, may only be willing to pay you a certain wage. But you can make the conscious decision not to spend your paycheck in its entirety and instead, allocate a large portion of it to your 401(k) or IRA. You can also invest your savings heavily in stocks during your working years so you're able to generate nice returns in your portfolio. Over time, the amount of savings you're able to build could be huge.
In fact, if you save and invest $500 a month over a 40-year period and your portfolio generates an average annual 8% return, which is a bit below the stock market's average, you could end up retiring with over $1.5 million.
If you then decide to withdraw 4% of your savings balance each year in retirement, that's an annual income of $60,000 -- which is comparable to what Social Security would pay you if you're eligible for its maximum monthly benefit. Only whereas it may not be in your power to score that maximum benefit, it's definitely within your power to set aside money for retirement and choose savvy investments.
A giant Social Security payday during retirement would certainly be a nice thing to have. And working longer and building skills to grow your earnings could be two effective ways to get one.
Just don't stress if you realize that you won't be getting Social Security's highest benefit. If you play your cards right, you can set yourself up with enough income to enjoy retirement to the fullest without even having to work those monthly benefits into your budget.
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Don't Chase Social Security's Maximum Benefit. Do This to Retire a Millionaire Instead was originally published by The Motley Fool