How much income does Social Security provide, exactly?
The answer to this question is more complicated than you might think because so many factors affect how much you receive in benefits, including how long you’ve worked, how much you’ve earned throughout your career, and when you claimed Social Security.
Still, you need to have some idea of how retirement benefits affect the average senior citizen, especially since you may be shocked when you find out the truth about how much your retirement benefits will be.
Here’s what you need to know about the average benefits a typical retiree will receive, so you can be prepared.
This is the amount a typical retiree will receive from Social Security at ages 62, 67 and 70.
According to data from the 2023 Social Security Annual Statistical Supplement, the average annual income of pensioners is as follows: social security Retirement benefits are available at ages 62, 67, and 70.
|
Year |
Average monthly benefit |
|---|---|
|
62 |
$1,274.87 |
|
67 |
$1,844.83 |
|
70 |
$1,963.48 |
Information source: Social Security Administration
As you can see, these numbers are Really It’s low. Probably lower than you’d expect.
Now, it’s true that the average benefit is higher at age 70 than at age 62. And there’s a good reason for that.
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If you postpone claiming your benefits until age 70, you can receive a deferral of retirement deductions, which can increase your payment by up to 24%. Full retirement age (age of eligibility for standard benefits) is 67 years old.
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If you file at age 62, the early filing penalty will permanently reduce your benefits by up to 30% at your FRA of 67.
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Higher earners are more likely to wait to take their pension until age 70. Because retirement benefits are a percentage of pre-retirement income, higher earners get more.
still, flat The maximum average benefit available at age 70 would only amount to about $23,561.76 a year — not enough for most people.
Living in retirement can be expensive, both in terms of medical costs and because many seniors have expensive dreams like traveling. For most people, an annual income of just $23,561.76 may not even be enough to cover basic living expenses, let alone enjoy life after decades of hard work.
Why is the average Social Security benefit so low?
So why is the average Social Security benefit so shockingly low? It’s part of the system’s design. Social Security benefits were never intended to be seniors’ sole source of income; they were meant to be tied to savings and employer-provided pensions. Each of these three sources of income was part of the “three-legged stool” that lawmakers envisioned to support seniors.
The number of private sector workers receiving pensions has fallen so dramatically that most people no longer have a pension fund as their only source of income. Social Security and personal savings are the only two sources of income left.
While you can increase your Social Security benefits by delaying claiming, data on average benefits shows that even if you delay receiving benefits until age 70, the average senior still won’t get by on their benefits. You need a plan to generate additional income, ideally passively through investment returns or withdrawals from your 401(k).
If you don’t understand the truth about what Social Security will provide you, looking at your average benefits now could help you avoid a serious, devastating financial shock later in life. Start planning and saving so you have the income you need for the retirement you want.
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The average Social Security benefits at age 62, 67, and 70 are unimaginable. Originally published on The Motley Fool
