Policy Basics: Top Ten Facts About Social Security
Social Security provides a foundation of income on which workers can build to plan for their retirement. It also provides valuable social insurance protection to workers who become disabled and to families whose breadwinner dies.
Eighty-six years after President Franklin Roosevelt signed the Social Security Act on August 14, 1935, Social Security remains one of the nations most successful, effective, and popular programs.
Why The Adjustment Isnt A Perfect Solution To Seniors Rising Costs
Its not clear right now whether higher Social Security payments will contribute to spiraling inflation. But Arnone said that older people are much more likely to spend money than save it, giving his organization a clear sense that it will help mitigate a recession.
Every month this year, the cost of inflation has far exceeded the 5.9 percent cost-of-living increase that was set at the end of 2021, Johnson said. That means last years COLA is not meeting the current economic strains.
How To Prepare For What Social Security Won’t Cover
Your retirement expenses could look different from your expenses today. This makes them difficult to estimate, but doing so is key to determining how much you need to save. You can use your current expenses as a baseline, but think about how your spending in each category will change between now and retirement. For example, you might spend more on healthcare as you age but little to nothing on child care once you’re retired.
Once you have a rough estimate of your annual retirement expenses, multiply this by the number of years you expect your retirement to last, adding 3% annually for inflation. Or you can use a retirement calculator to do the math for you. That should give you the total amount you need to cover your retirement expenses. But you don’t have to save all this on your own.
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Social Security Benefits For Workers Turning 60 In 2020 Will Very Likely Drop Due To The Coronavirus Pandemic
Congress could pass legislation that would prevent this outcome.
As a result of the COVID-19 pandemic, about 3 million retired workers who turn 60 years old in 2020 will very likely have much lower lifetime Social Security benefits than previously expected. Without legislative changes, the average earner stands to lose nearly $1,500 per year for the rest of their life. Fortunately, there is a simple legislative changeexplored in detail belowthat would fix these problems without lowering the benefits of any other cohort of retirees. Chairman of the U.S. House Ways and Means Social Security Subcommittee, Rep. John Larson , has introduced such legislation*and Congress should fix this situation as soon as possible.
How Much Will I Get From Social Security
Your retirement benefit is based on your lifetime earnings in work in which you paid Social Security taxes. Higher income translates to a bigger benefit . The amount you are entitled to is modified by other factors, most crucially the age at which you claim benefits.
For reference, the average Social Security retirement benefit in May 2022 was $1,668 a month. The maximum benefit the most an individual retiree can get is $3,345 a month for someone who files for Social Security in 2022 at full retirement age , the age at which you qualify for 100 percent of the benefit calculated from your earnings history. FRA is 66 and 4 months for people born in 1956 and is gradually rising to 67 for those born in 1960 or later.
Youll only know your own amount for sure when you apply, but there are ways to get a sense of it in advance. The quickest and easiest is to use AARPs Social Security Benefits Calculator or check your online My Social Security account. The latter draws on your earnings record on file with the Social Security Administration for the AARP calculator, youll need to provide your average annual income.
Both tools project what you could collect each month if you start Social Security at age 62, the earliest you can file for retirement benefits at full retirement age and at age 70. Between 62 and FRA, Social Security reduces your benefit for filing early between FRA and 70, it increases your payment as a reward for waiting.
Keep in mind
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Federal Income Taxation Of Benefits
Originally the benefits received by retirees were not taxed as income. Beginning in tax year 1984, with the Reagan-era reforms to repair the system’s projected insolvency, retirees with incomes over $25,000 , or with combined incomes over $32,000 or, in certain cases, any income amount generally saw part of the retiree benefits subject to federal income tax. In 1984, the portion of the benefits potentially subject to tax was 50%. The Deficit Reduction Act of 1993 set the portion to 85%. Moreover, since the taxable income threshold is not indexed to inflation, the portion of beneficiaries’ social security payments subject to income tax has risen significantly in real terms since the threshold was set in 1984.
How Will The Social Security Increase Help People
The impact could be enormous, experts say. The average retired person will see a monthly increase of around $144 in payments, according to the SSA, and the average monthly payment to a retired beneficiary will be $1,827.
The more than 70 million Americans who receive Social Security payments, Supplemental Security Income payments or both will start to see that increase beginning in either December or January.
According to the SSA, 55 percent of Social Security recipients in 2021 were women. And though the vast majority of those Americans are retired, around 3 million children also receive Social Security payments. Others who get payments include people with disabilities and people who have lost spouses.
Of the 70 million Americans who receive Social Security benefits, more than three-quarters are 65 or older. Graphic by Jenna Cohen and Megan McGrew.
The estimated average payment for a widow with two children will jump from $3,238 to $3,520, according to the SSA, and the average payment for disabled workers will increase from $1,364 to $1,483.
Another important change will be the decrease in Medicare Part B premiums, said Mary Johnson, Social Security and Medicare policy analyst at the Senior Citizens League.
We have not seen that combination ever, and this may be the one and only time we ever see it, Johnson said. So Im encouraging everybody to appreciate it.
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You May Or May Not Like The Number You See
The upside of being married in retirement is having a partner to share experiences and expenses with. The downside, though, is having more expenses.
It costs more money to pay for food, healthcare, and other essentials for two people than one. But thankfully, senior couples typically receive more Social Security income than singles.
In 2022, the average individual monthly Social Security benefit will be $1,657. That number accounts for the 5.9% cost-of-living adjustment recipients are getting in the new year.
Meanwhile, the average senior couple on Social Security will be in line for $2,753 a month in benefits next year. And you may notice that that number is not twice as high as the average individual benefit.
Image source: Getty Images.
Why so? It’s often the case that within a given couple, there’s a higher earner and a lower earner. And that alone could explain why the average benefit for couples isn’t twice the average benefit for singles.
Also, many take advantage of spousal benefits in situations where one spouse never worked and therefore isn’t entitled to benefits based on his or her own work record. Those who are married and claiming spousal benefits can receive up to 50% of their spouse’s monthly Social Security paycheck, which also explains that lower benefit for couples.
The Full Retirement Age Based On Year You Were Born
You can start receiving your Social Security retirement benefits as early as age 62.
However, if you start receiving benefits early, your benefits are reduced.
If you delay taking your benefits from your full retirement age up to age 70, your benefit amount will increase.
Heres a breakdown of the full retirement age by birth year.
For those born in 1960 or later, the full retirement age is 67.
|Full Retirement Age|
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Office Of Hearings Operations
On August 8, 2017, Acting Commissioner Nancy A. Berryhill informed employees that the Office of Disability Adjudication and Review would be renamed to Office of Hearings Operations . The hearing offices had been known as “ODAR” since 2006, and the Office of Hearings and Appeals before that. OHO administers the ALJ hearings for the Social Security Administration. Administrative Law Judges conduct hearings and issue decisions. After an ALJ decision, the Appeals Council considers requests for review of ALJ decisions, and acts as the final level of administrative review for the Social Security Administration .
Women And Racial Minorities Often Earn Less
Unfortunately, women generally receive a lower monthly benefit than men. That is a product of income level, as women have historically earned less than men. In 2019, women age 65 and older received an average annual Social Security income of $13,505, compared to $17,374 for men. Thats about $1,125 per month for women and about $1,447 per month for men. The SSA notes that these lower benefits correlate to lower lifetime earnings and more part-time work.
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What Is The Average Social Security Benefit At Age 62
According to the Social Security Administration , if you were born between 1943 and 1954, your full retirement age is 66. By claiming at the age of 62, a hypothetical $1000 retirement benefit would be reduced by 25% and you would only receive $750 per month. A $500 monthly spousal benefit would be reduced to $350.
The greater the gap between age 62 and FRA, the higher the percentage of reduction in retirement benefits. For those born in 1960 or later, retirement benefits are reduced by 30% and spousal benefits are reduced by 35%. This means a $1000 retirement benefit would be reduced to $700 per month.
According to the SSAs 2021 Annual Statistical Supplement, the monthly benefit amount for retired workers claiming benefits at age 62 earning the average wage was $1,480 per month for the worker alone. The benefit amount for workers with spouses claiming benefits was $2,170 at age 62.
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Although claiming before FRA allows you to collect retirement benefits for a longer period of time, your benefit amount will be significantly reduced. The SSA says that if you delay your benefits until after FRA, you will be eligible for delayed retirement credits that would increase your monthly benefit.
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This Will Be The Average Monthly Social Security Payout In 2021
The question is, what does a 1.3% COLA really mean for beneficiaries? Let’s take a closer look.
As of September, 64.75 million people were netting a monthly Social Security payout, of which nearly 46.1 million were retired workers. The average retired worker benefit last month was $1,519.07. Based on recently released estimates from the SSA, monthly retired worker payouts are expected to hit $1,523 by December 2020. And factoring in a 1.3% COLA jump, that will increase by $20 to $1,543 in January 2021. In other words, the average retired worker is going to net an extra $240 for the entirety of 2021.
For disabled workers, the increase is going to be a little less robust, in nominal terms. All beneficiaries are set to receive a 1.3% COLA, but the program’s 8.25 million disabled workers were only bringing home $1,259.12 a month as of September. By December, the SSA estimates this monthly payout will grow slightly to $1,261. Thus, a 1.3% COLA should result in an estimated monthly increase of $16 by January 2021, pushing the average disabled worker benefit to $1,277.
The SSA provides a number of other estimated average-payout scenarios following the 1.3% COLA that may be relevant to you:
Image source: Getty Images.
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Fact #: Social Security Provides A Foundation Of Retirement Protection For Nearly All People In The Us
97% of older adults either receive Social Security or will receive it.
Almost all workers participate in Social Security by making payroll tax contributions, and almost all older adults receive Social Security benefits. In fact, 97 percent of older adults either receive Social Security or will receive it, according to Social Security Administration estimates.
The near universality of Social Security brings many important advantages. It provides a foundation of retirement protection for people at all earnings levels. It encourages private pensions and personal saving because it isnt means-tested it doesnt reduce or deny benefits to people whose income or assets exceed a certain level. Social Security provides a higher annual payout than private retirement annuities per dollar contributed because its risk pool is not limited to those who expect to live a long time, no funds leak out in lump-sum payments or bequests, and its administrative costs are much lower.
Universal participation and the absence of means-testing make Social Security very efficient to administer. Administrative costs amount to only 0.6 percent of annual benefits, far below the percentages for private retirement annuities. Means-testing Social Security would impose significant reporting and processing burdens on both recipients and administrators, undercutting many of those advantages while yielding little savings.
Private Retirement Savings Crisis
While inflation-adjusted stock market values generally rose from 1978 to 1997, from 1998 through 2007 they were higher than in March 2013. This has caused workers’ supplemental retirement plans such as 401s to perform substantially more poorly than expected when current retirees were investing the bulk of their savings in them. In 2010, the median household retirement account balance for workers aged 55 to 64 was $120,000, which will provide only a trivial supplement to Social Security benefits, but about a third of households had no retirement savings at all. 75% of Americans nearing retirement age had less than $30,000 in their retirement accounts, which Forbes called “the greatest retirement crisis in American history.”
Only Part Of A Bigger Plan
Regular Social Security checks worth between $2,000 and $2,400 per month are great, but if youve grown accustomed to a salary of $100,000 or more, that amount may not fund the sort of retirement lifestyle youre hoping to live in your golden years.
Then again, it was never meant to. Social Security is only intended to complement workers other forms of personal retirement savings. Thats why investors of all income profiles should make a point of building income-producing wealth for retirement outside of Social Security payments.
The good news is, building a nice nest egg doesnt really require a six-figure income. Its entirely possible to become a millionaire on the more typical income of $34,000 per year just by getting started early and consistently adding a little to the pot every year. If you do that, any Social Security checks you do get later in life are just a nice bonus.
The $16,728 Social Security bonus most retirees completely overlook
If youre like most Americans, youre a few years behind on your retirement savings. But a handful of little-known Social Security secrets could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,728 more each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind were all after. Simply click here to discover how to learn more about these strategies.
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What Is The Average Social Security Check For 2022
Here are the average Social Security checks for 2022, including other relevant numbers for the year, according to the Social Security Administration.
The average Social Security Check for all retired workers is $1,657.
See below for the other average checks by category.
|Estimated Average Monthly Social Security Benefits Payable in January 2022|
|Aged Couple, Both Receiving Benefits||$2,599|
|Widowed Mother and Two Children||$3,009|
|Disabled Worker, Spouse, and One or More Children||$2,250|
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Example Of Maximum Social Security Benefits
Say that someone who turned 62 in 2021 will reach FRA at 66 years and 10 months, with earnings that make them eligible at that point for a monthly benefit of $1,000. Opting to receive benefits at age 62 will reduce their monthly benefit by 29.2%, to $708, to account for the longer time that they could receive benefits, according to the Social Security Administration . That decrease is usually permanent.
If that same person waits to get benefits until age 70, their monthly benefit increases to $1,253. The larger amount is due to the delayed retirement credits earned for the decision to postpone receiving benefits past FRA. In this example, that higher amount at age 70 is about 77% more than the benefit that they would receive each month if benefits started at age 62a difference of $545 each month.
Of course, the best time for someone to start taking Social Security benefits depends on a variety of factors, not just the dollar amount of the benefit. Things such as current income and employment status, other available retirement funds, and life expectancy also must be factored into the decision.
The SSA has calculators to help you estimate your benefits.