Monthly Social Security checks for retired workers are probably more modest than you realize.
For more than eight decades, Social Security has been providing a financial foundation for those who could no longer do so for themselves.
Based on recently updated estimates from the Center on Budget and Policy Priorities, America’s top retirement program is pulling 22.7 million people above the federal poverty line annually. This includes 16.5 million adults aged 65 and above. Without the guaranteed monthly payout provided by Social Security, the elderly poverty rate would nearly quadruple to 39% from 10.2% (as of 2022).
It’s also a program that’s vital in helping retired workers make ends meet. For more than 20 years, national pollster Gallup has been conducting annual surveys of retirees to gauge their reliance on Social Security income. Between 80% and 90% of respondents have consistently noted that their benefits account for a “major” or “minor” source of income.
But what future generations of retirees may not realize is that Social Security retired-worker benefits are quite modest.
Here’s how much the average Social Security retired-worker beneficiary is bringing home each month
Although Social Security has a number of quirks and complex rules that can make understanding it a challenge at times, calculating your monthly retired-worker benefit is done using four very straightforward factors:
- Work history
- Earnings history
- Full retirement age
- Claiming age
Without delving too deeply into each category, the Social Security Administration (SSA) uses your 35 highest-earning, inflation-adjusted years of income (meaning wages and salary, but not investment income) to calculate your benefit. The pivot point that determines whether you’ll receive 100% of your payout, or some percentage above or below this level, is your full retirement age, which is determined by your birth year.
The final factor — your claiming age — can have the biggest effect of all. Depending on when you choose to begin receiving your Social Security check, your monthly payout could be reduced by up to 30%, relative to what you’d have received at full retirement age. Or it can increase by between 24% and 32% with a later claim.
As of January 2024, the SSA’s monthly published snapshot shows that the average retired-worker beneficiary was bringing home $1,909.01, or about $22,908 on an annualized basis. For added context, the federal poverty level for an individual tax filer is $15,060 in 2024.
Social Security income is only designed to replace around 40% of workers’ pre-retirement earnings, which means it’s imperative that future retirees get as much as they can out of the program. Thankfully, there are three relatively easy ways for future retirees to boost their benefits.
1. Consider working well past the 35-year mark
One of the smartest ways for future recipients to get the most they can out of Social Security is to work longer than 35 years.
As noted, the SSA will use your 35 highest-earning, inflation-adjusted years when calculating your monthly benefit. For every year less than 35 worked, the SSA penalizes you by averaging in a $0. If you have any hope of maximizing what you’ll receive from America’s top retirement program, you’ll need to work at least 35 years.
As you age and gain both skill and experience, you’re more likely to command a higher wage or salary — even when adjusted for inflation. Working well into your 50s and 60s can remove lower-earning years from when you initially entered the labor force, which should ultimately result in a higher monthly benefit from Social Security.
2. Sit on your hands and be patient
Sometimes doing nothing really is the smartest move you can make. For every year you wait to take your payout, beginning at age 62 and continuing through age 69, your monthly benefit can increase by as much as 8%. This is why early filers can have their monthly payout permanently reduced by up to 30%, while those claiming at age 70 can generate 24% to 32% more per month than they would have received at full retirement age.
What’s particularly interesting about playing the waiting game is that a comprehensive study validates the notion that patience pays off.
In 2019, researchers at United Income used data from the University of Michigan’s Health and Retirement Study to analyze the claims of 20,000 retired-worker beneficiaries. The goal for researchers was to extrapolate these claims to determine if the individual made an “optimal” decision — one that produced the highest lifetime income. Understand that the highest monthly and highest lifetime income may not be synonymous.
United Income’s report found that actual and optimal claims were inverses of each other. Whereas most workers chose to receive their payouts prior to full retirement age, optimal claims overwhelmingly skewed to ages at or after full retirement age. In fact, age 70 would have been optimal for 57% of the claimants studied.
Although there are valid reasons to claim benefits early — for example, a person with one or more chronic health conditions whose life expectancy may be shortened can benefit from an early claim — statistically speaking, most future claimants are likely to be rewarded for their patience.
3. Lean on Social Security’s little-known do-over clause
The third relatively easy way future retirees can potentially increase what they’ll receive from Social Security is by taking advantage of an under-the-radar Social Security do-over clause known as “SSA-521” (officially, “Request for Withdrawal of Application”).
SSA-521 is a request by retired-worker beneficiaries to undo their claim. If approved by the SSA, your benefit would go back to accruing at a rate of up to 8% annually until you, once again, file for benefits.
Where SSA-521 can come in handy is in instances where a retiree regrets an early filing or perhaps lands a well-paying job mere months after they begin receiving their benefit.
But keep in mind that this Social Security mulligan comes with three notable restrictions. To start with, you only have until 12 months after your benefit approval to file SSA-521. Second, this is a one-time do-over, so you won’t be able to continually stop and start your benefits if you regret your claim. And third, you’ll need to repay every cent in benefits received until SSA-521 is approved. This includes any benefits spouses or children may have received that were based on your earnings history.
Though not all retirees will be able to take advantage of SSA-521, it can come in handy in the right situation.
