What Amount Does Social Security Pay in Retirement?


Amid current times of rampant rumor and widespread conjecture that our country’s Social Security program is insolvent, many credible accounts about American workers worrying over retirement security come as no surprise.

The universal concern that seems to lie at heart of the matter is whether there will be enough money left for today’s workers to collect benefits tomorrow. Consequently, people are rightfully curious about how much they stand to collect when they retire, assuming there’s something left to collect. While this question is certainly legitimate, the correct answer differs for every person who ponders the point. Following is a basic guide to help hard-working people decide what their best options are to ensure a comfortable retirement.

Earnings-Based or Eternally Biased?

Social Security retirement benefits are reportedly based on each recipient’s earnings record. The Social Security Administration (SSA) calculates benefit levels by using an “Average Indexed Monthly Earnings” (AIME) to summarize up to 35 years of indexed earnings. SSA then selects only those years when earnings were highest and applies a formula to adjust for inflation as well as generalized increases in wage levels and the cost of living during your work years. The result determines your monthly benefit amount.

How to Raise Social Security Retirement Benefits

Despite the extreme complexity of various mathematical formulas used to calculate Social Security retirement benefits, some simple but very effective strategies do exist that can drastically increase your benefit amount. • Patience Is a Very Valuable Virtue for Prospective Pensioners To receive the maximum benefit, you must be of “full retirement age.” That age varies by the year in which you were born. Baby Boomers born between 1943 and 1959 must wait at least 10 months after their 66th birthday to collect their full benefit. Workers born in 1960 and thereafter will have to wait until they are 67 years old to claim their full benefit. Besides waiting until full retirement age, you can raise your monthly benefit by holding off a bit longer. For instance, if you were born in 1943 or later, your benefit increases by 8 percent for every year of delay beyond full retirement age until you turn 70. Since the risk of running out of money increases with time, it pays to wait because you can’t outlive Social Security benefits. • Recruit Your Spouse to Raise Both Retirement Benefits Married people have the option to claim Social Security based on their own earnings or half of their spouse’s higher earnings. If one spouse dies, their surviving partner may collect the deceased earner’s full benefit. This makes it advisable for higher earners to apply for benefits based on how old they would be when their spouse dies. For instance, suppose a husband earns more than his wife does. He should wait until age 70 to collect benefits because his widow will receive his full benefit when he dies. Married people who have attained full retirement age can even collect spousal payments and later convert to benefits based on their own earnings. The spouse whose earnings were higher may file and then suspend while the other collects half of the higher earner’s benefit for up to four years. After that time, the higher earning spouse will still receive credit for delaying benefits. • Boost Earnings for Higher Benefits Because Social Security retirement benefits are earnings-based, the more you pay into the program now, the more it will owe you later on. As it can take up to 35 years of earnings to calculate your benefit amount, you should work for at least that long. If you have less than 35 years’ earnings history, the SSA will average a zero for each year with no indexed earnings, which will in turn lower your benefit amount substantially. This means it’s definitely in your decided favor to earn as much and as long as possible. That rule even holds true post-retirement. As of 2015, retired workers may earn up to $48,000 without reducing their current Social Security benefits. Should you decide to delay benefits past full retirement age, be sure that each year of delay reflects enough indexed earnings required to receive the maximum annual credit of 4 quarters.

Brief Recap of Social Security Retirement Benefits

While the exact figure will vary widely from one worker to the next, Social Security retirement benefits are never high enough to satisfy any ex-worker. However, all workers can maximize their hard-earned earnings history when it’s time to retire by remembering a simple two-step formula: Work and wait as long as possible.