Most Retirees Will Never See Social Security's Biggest Check - Here's Why

Many retirees today are living on just Social Security, and the average monthly retirement benefit Social Security currently pays is about $2,088. However, there are some Social Security recipients who receive as much as $5,181 per month, which is the maximum retirement benefit the program will pay.

A $5,181 monthly paycheck may sound nice. But here's why you probably won't get to collect the biggest benefit Social Security pays, and what you can do to improve your retirement finances in light of that.

How Social Security calculates your monthly benefits in retirement

Your monthly Social Security benefit in retirement is calculated based on your individual wage history. The Social Security Administration takes your 35 highest-paid years of earnings into account when calculating your monthly benefits. Earlier wages are adjusted in that formula to account for the national average wage.

Your filing age also helps determine how much Social Security you get. For instance, if you file for benefits at full retirement age (FRA), you'll get those benefits without a reduction. If you file earlier, which you can do starting at age 62, your benefits will get reduced. 

If you delay your Social Security claim past FRA, your benefits get an 8% increase for each year you wait, up until the age of 70.

Why snagging Social Security's maximum benefit is so hard

To get Social Security's maximum retirement benefit, you have to do three things:

• Work for a minimum of 35 years
• Delay your claim until age 70
• Earn the equivalent of Social Security's wage cap for 35 years

That last item may not be within your control, which explains why so many people do not qualify for the maximum retirement benefit from Social Security.

The wage cap represents the amount of earnings that are taxed each year to fund Social Security. The wage cap changes over time, but it's always a high number compared to average wages.

This year, for example, Social Security's wage cap is $184,500. Median earnings, on the other hand, are $1,251 per week, or about $65,000 per year.

Because most people do not earn the equivalent of Social Security's wage cap or higher, the maximum retirement benefit isn't something they qualify for. And even if your earnings increase at some point in your career, earning the equivalent of the wage cap for 35 years is a very tall order. So you probably shouldn't plan on getting the maximum Social Security retirement benefit unless you start your career with a very large paycheck.

How to boost your Social Security benefit, even if you can't get the maximum

Just because you don't qualify for the maximum Social Security benefit doesn't mean you can't take steps to boost your monthly checks. For one thing, waiting until age 70 to file automatically gives your benefits a sizable increase.

You can also try strategically raising your income during your career to score higher benefits. That could mean job-hopping every few years, picking up plenty of overtime when it becomes available, or working a freelance gig on top of your regular job. Freelance wages count toward Social Security as long as you report the income and pay taxes on that money, which is actually a legal requirement.

How to supplement your Social Security benefits

Even if you end up with a generous Social Security benefit in retirement, those monthly checks may not cover your costs in full. So it's important to find ways to supplement your Social Security.

One option is to work part-time as a retiree. Another is to choose investments that pay you on a regular basis, like dividend stocks or bonds.

Contributing to a retirement account throughout your career could also give you nice supplemental income once you stop working. Aim to automate contributions to an IRA or 401(k) every month so you have money to withdraw later in life. It's okay to start with a small monthly contribution and work your way up to a larger amount over time. Starting with $25 monthly, for example, is better than saving nothing.

Bottom line

You may be disappointed to learn that Social Security's highest possible monthly check might not be available for you. 

However, one thing to keep in mind is that even seniors who do get Social Security's maximum benefit generally can't live on that paycheck alone. That's because people who are eligible for $5,181 per month in benefits are high earners by nature, so they're used to living on a lot more money than that.

In fact, retiring on Social Security alone is one of the biggest financial mistakes anyone can make in retirement, and that extends to seniors who are eligible for the maximum benefit. It's important to find ways to supplement your Social Security checks so you're able to enjoy the type of lifestyle you want after many years of hard work.

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