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. Your full retirement age, the third factor, is beyond your control and hinges on your birth year. It denotes the age at which you’re eligible for your complete retired-worker benefit.
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 first two factors, work history and earnings history, are relatively self-explanatory. The Social Security Administration (SSA) takes into account your 35 highest-earning years, adjusted for inflation, to compute your monthly retired-worker payment. Generally, a higher lifetime income corresponds to a larger Social Security benefit, up to the maximum monthly payout at full retirement age. Keep in mind, however, that for every year less than 35 years worked, the SSA includes a $0 calculation in the average.
Full retirement ages usually fall at 66, 67, or an intermediate point. The fourth determinant, your claiming age, offers a strategic decision. Although you can initiate benefits at 62, patience can yield substantial rewards. With each year of delay, your monthly payment can increase by up to 8%, up until age 69.
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.
What Is the Current Average Social Security Benefit?
Now that you possess a more comprehensive comprehension of the factors that amalgamate to shape your monthly Social Security disbursement, let’s delve into the finer details of what the typical recipient is presently receiving.
Based on the most recent data release, the Social Security Administration (SSA) disbursed approximately 66,663,000 payments in June 2023, amounting to a sum of $113.384 billion. When considering all beneficiaries encompassing retired workers, disabled workers, survivor beneficiaries, as well as spouses, children, widow(er)s, and parents of deceased workers who qualify, the present average Social Security payment stands at $1,701.62 per month, which translates to roughly $20,419 per annum.
However, noteworthy differences in payouts emerge when analyzed across distinct categories. For instance, retired workers claim the most substantial average Social Security benefit. Among the nearly 49.4 million retired workers who received benefits in June, the average monthly disbursement amounted to $1,837.29, equating to an annual sum of $22,047.
In contrast, workers with disabilities and survivor beneficiaries exert a downward pressure on the mean payout. As of June, the 7.52 million workers with disabilities were receiving an average monthly payment of $1,486.42, while the collective 5.84 million survivor beneficiaries were obtaining $1,451.85 per month. When extrapolated over a year, individuals with disabilities typically accrue $17,837, while the average survivor beneficiary receives around $17,422.
While Social Security may not usher in affluence for its beneficiaries, the financial support it extends undoubtedly plays a pivotal role in averting poverty for many.