Earning a huge salary doesn't mean you're necessarily going to get a gigantic Social Security benefit. Find out why monthly retirement checks may not be that high for millionaires.
In the United States, pretty much every worker pays into Social Security. This includes very high earners. And everyone who paid into the program gets retirement benefits, even if they are really rich and don't need the money. It's not a means-tested benefit limited to those with low earnings.
Social Security benefits are based on a percentage of income earned throughout the 35 highest-earning years in your career. So those who make more money get bigger benefits checks. The specific amount is based on how much money was made over the relevant 35 years, as well as when benefits were claimed.
So what if someone were making $1 million a year -- a hefty sum that would make them one of the top earners in the country? How much would their retirement check be?
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This is how much millionaire workers get from Social Security
An income of $1 million a year amounts to a monthly payment of about $83,333.33.
Retirement benefits are generally designed to replace about 40% of pre-retirement income. However, they replace less for high earners because the benefits formula is progressive. Still, with such a high monthly salary, this would suggest that someone who earned a million each year for 35 years of their career could expect to get a monthly Social Security check equal to close to $33,333.
That wouldn't happen, though. In fact, in 2024, the most a person who had earned $1 million throughout their career could receive in benefits is $4,873. And that's only if they claimed their first retirement payment at age 70.
Why do millionaires get such a small Social Security benefit relative to earnings?
Now, let's be clear -- $4,873 is a lot of money. But not to someone used to making a million.
So why don't millionaires get bigger Social Security benefits? The reason is simple. High earners don't pay Social Security taxes on all their income, and only a portion of their income is considered as part of their wages when benefits are calculated.
Each year, the Social Security Administration establishes something called the "wage base limit." In 2024, the wage base limit is $168,600. The amount adjusts due to wage growth over time.
All income earned up to the wage base limit is taxed. It's added to your earnings record, and if it is one of your higher-earning years, it is factored in when your average wages are calculated over the 35 years included in your benefits formula. The average wage that is calculated determines your monthly Social Security benefit.
But if you earn income above the wage base limit, as you would if you earned $1 million a year, none of that extra money would be subject to Social Security tax. None of it will count in your benefits calculation, so your benefit won't grow because of it. This is true whether you earn $1 million or $10 million or $100 million. No matter how much you make, not a dime over $168,600 will be counted when your Social Security benefits are determined.
So while millionaires get more Social Security than those who earned far less, it's not as much more as you might think. And the reality is that the maximum monthly Social Security benefit is not ever going to replace enough of your income to allow you to live the lifestyle you are accustomed to no matter how much you make.
So whether you're a millionaire or earn far less, it's up to you to save and invest throughout your career so you can have security as a senior.
FAQs
An income of $1 million a year amounts to a monthly payment of about $83,333.33.
Can you collect Social Security if you are a millionaire? ›
The amount a person receives in Social Security benefits is not directly affected by their current income or wealth. Therefore, even if someone is a millionaire or billionaire, they can still receive Social Security benefits if they have a qualifying work history.
How much is Social Security if you make $100000 a year? ›
If your pay at retirement will be $100,000, your benefits will start at $2,026 each month, which equals $24,315 per year. And if your pay at retirement will be $125,000, your monthly benefits at the outset will be $2,407 for $28,889 yearly.
What is the average Social Security check at age 65? ›
According to data from the Social Security Administration, as of January 2024, the average monthly retirement benefit payment was $1,909.01, which comes to about $22,322 per year.
What is the maximum Social Security benefit for high income earners? ›
The maximum Social Security benefit at full retirement age is $3,822 per month in 2024. It's $4,873 per month in 2024 if retiring at age 70 and $2,710 if retiring at age 62.
How much Social Security will I get if I make $1 million a year? ›
This is how much millionaire workers get from Social Security. An income of $1 million a year amounts to a monthly payment of about $83,333.33. Retirement benefits are generally designed to replace about 40% of pre-retirement income.
What is the highest amount of Social Security a person can collect? ›
The maximum Social Security check
Your maximum benefit if you file at full retirement age – between 66 and 67 – is $3,822 per month. Your maximum benefit if you file at age 70 – the age when extra benefits stop accruing – is $4,873 per month.
What is the highest amount paid for Social Security benefits? ›
The maximum Social Security benefit you can receive in 2024 ranges from $2,710 to $4,873 per month, depending on the age you retire. "Maximum benefits can be received by delaying the start of benefits until age 70 since benefits increase by about 8% for each year you delay beyond full retirement age.
How much Social Security will I get if I make $120000 a year? ›
The point is that if you earned $120,000 per year for the past 35 years, thanks to the annual maximum taxable wage limits, the maximum Social Security benefit you could get at full retirement age is $2,687.
Is Social Security based on the last 5 years of work? ›
Social Security bases your retirement benefits on your lifetime earnings. We adjust or “index” your actual earnings to account for changes in average wages since the year the earnings were received. Then we calculate your average indexed monthly earnings from your highest 35 years of earnings.
You can start receiving your Social Security retirement benefits as early as age 62. However, you are entitled to full benefits when you reach your full retirement age. If you delay taking your benefits from your full retirement age up to age 70, your benefit amount will increase.
At what age is Social Security no longer taxed? ›
While you may have heard at some point that Social Security is no longer taxable after 70 or some other age, this isn't the case. In reality, Social Security is taxed at any age if your income exceeds a certain level.
At what age do you get 100% of your Social Security? ›
The full retirement age is 66 if you were born from 1943 to 1954. The full retirement age increases gradually if you were born from 1955 to 1960 until it reaches 67.
When a husband dies, does his wife get his Social Security? ›
Surviving spouse, any age, with a child younger than age 16, gets 75% of the worker's benefit amount. Child gets 75% of the worker's benefit amount. There's a limit to the benefits we can pay to you and other family members each month. The limit varies between 150% and 180% of the deceased worker's benefit amount.
How much Social Security will I get if I make $100,000 a year? ›
If your highest 35 years of indexed earnings averaged out to $100,000, your AIME would be roughly $8,333. If you add all three of these numbers together, you would arrive at a PIA of $2,893.11, which equates to about $34,717.32 of Social Security benefits per year at full retirement age.
Can you be too rich for Social Security? ›
Contributions to Social Security are not linked to how much money you make. Once someone reaches an income of $168,600 or more, they stop paying in. This means a millionaire's effective tax rate is less than 1 percent — and they aren't required to pay anything for their unearned investment income.
Can a person make too much money to collect Social Security? ›
If you will reach full retirement age in 2024, the limit on your earnings for the months before full retirement age is $59,520. Starting with the month you reach full retirement age, there is no limit on how much you can earn and still receive your benefits.
Why do millionaires not pay into Social Security? ›
That's because Social Security's payroll tax doesn't apply to earned income above a certain level. For 2024, the cut-off is $168,600, and capital gains—such as stock appreciation—are not subject to the payroll levy at all.
Do high earners pay into Social Security? ›
Workers pay Social Security tax up to a maximum income level, which was $160,200 in 2023. Earnings above that threshold aren't taxed for Social Security.
