Since its enactment by President Franklin D. Roosevelt in 1935, Social Security has evolved into a cornerstone of financial support for elderly individuals in our country. As highlighted by the Center on Budget and Policy Priorities, the annual influx of Social Security income plays a pivotal role in elevating over 21.7 million individuals out of poverty, a substantial portion being 15.4 million seniors aged 65 and beyond.
A notable aspect of Social Security pertains to its role as a supplementary income for retirees, aiding them in meeting their financial obligations. However, it’s worth noting that the standard benefit amount remains relatively moderate on average. In essence, claiming benefits before reaching full retirement age leads to a lasting reduction of up to 30%, while waiting beyond this age range can elevate your benefits by 24% to 32%, contingent on your birth year.
Unveiling the Formula for Calculating Your Social Security Benefit
Before delving into the current average income received by Social Security beneficiaries, it’s essential to grasp the intricate components that contribute to the determination of your monthly benefits. These components are influenced by four key factors, assuming you have acquired the necessary 40 lifetime work credits to qualify for Social Security payments:
- Work History: The trajectory of your work experiences.
- Earnings History: Your income records over time.
- Full Retirement Age: The age at which you’re entitled to 100% of your retired-worker benefit, determined by your birth year.
- Claiming Age: The age at which you begin receiving benefits, impacting the amount you receive monthly.
The factors of work history and earnings history are relatively straightforward. The Social Security Administration (SSA) evaluates your top 35 years of income, adjusted for inflation, to determine your monthly payment after retirement. Generally, an increased overall income over your lifetime results in a higher Social Security payout, capped at the maximum allowable monthly benefit when you reach full retirement age. It’s important to note that if you have less than 35 years of work, the SSA factors in a $0 for each missing year in the calculation.
The age at which you qualify for your entire retired-worker benefit, known as your full retirement age, is the third factor and is something you can’t change. It’s based on the year you were born and typically falls at age 66, 67, or somewhere in between.
Lastly, the age at which you choose to start receiving benefits, known as your claiming age, is a critical and strategic choice. While you have the option to begin receiving benefits at age 62, waiting can prove beneficial. For every year you delay, up to age 69, your monthly payment may grow by as much as 8%.
What Is the Current Average Social Security Benefit?
With an understanding of the essential elements that form your monthly Social Security payment, we can now explore the specific details of what an average beneficiary receives as of current statistics.
The latest data from the Social Security Administration (SSA) shows that in June 2023, they issued about 66,663,000 payments, totaling approximately $113.384 billion. Analyzing all recipients, including retired and disabled workers, survivors, spouses, children, and relatives of deceased eligible workers, the mean Social Security payment comes to $1,701.62 monthly, or around $20,419 yearly.
It’s significant to highlight the variations in these payments across different categories. For example, retired workers are on the higher side of the average, receiving roughly $1,837.29 per month or an annual figure of $22,047.
On the other hand, disabled workers and survivor beneficiaries tend to lower the overall average. The data shows that the 7.52 million disabled workers were getting an average of $1,486.42 monthly, and the 5.84 million survivor beneficiaries received an average of $1,451.85 each month. These figures equate to an annual income of $17,837 for disabled workers and about $17,422 for survivor beneficiaries.
Though Social Security benefits may not lead to wealth, the financial assistance provided is undeniably crucial in preventing many from falling into poverty.