For many Americans, Social Security is not just a paycheck that they receive in their golden years. It is a much-needed financial lifeline that helps them survive during retirement.
According to an April survey by national researcher Gallup, 89% of current retirees rely on Social Security payments as their primary or secondary source of income. In the meantime, a historical record of 88% of non-retirees expect to rely on their Social Security income to some degree when they retire.
What you receive monthly from Social Security can significantly affect your financial well-being. But, as you will see, Social Security benefits can vary greatly according to age.
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These four factors determine how much Social Security will pay you
Before delving into how much the program pays on average and by age, let’s first examine the main factors that determine how much you will receive.
While there are more than half a dozen factors that can affect your Social Security net salary, four stand out above all others. Two of the four – your work history and earnings history – are tied at the hips. The Social Security Administration (SSA) takes into account the 35 best-paid and inflation-adjusted years when calculating their monthly benefit at full retirement age. The more you earn up to the maximum taxable income limit in a given year, the more you will receive during retirement. Just remember that for less than 35 years worked, the SSA will average $ 0 in its calculation.
The third determinant of significant payment is the year of birth. The year you were born determines the curvature points of the principal insurance amount. It also determines your full retirement age – that is, the age at which you become eligible to receive 100% of your monthly benefit. The full retirement age for baby boomers ranges from 66 to 67, with anyone born in 1960 or later with a full retirement age of 67.
Fourth and last, claiming age plays a big role in determining what you will receive from Social Security. Payments can start at age 62 or at any age later, but the SSA encourages patience. For each year that an individual postpones to receive his benefit, his monthly payment grows by up to 8% until he is 69 years old. All things being equal, like earnings history and year of birth, an individual who gets paid at 70 can receive up to 76% more per month than a retiree who complains at 62.
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The average monthly Social Security benefit by age
Now that you have a better understanding of the factors that determine monthly Social Security benefits, let’s look at the average age payout. In this link, you will find a breakdown of the payment provided by the SSA in June 2020 (rounded to the nearest whole dollar):
The most evident payment differences occur in the first years of eligibility. Between 62 and 70, the average monthly payment jumps from $ 1,130 to $ 1,612. This huge average difference in benefits can be explained by workers waiting to receive their payment. Although 67% of all current retired workers have their monthly benefit permanently reduced by the SSA (ie, they claimed benefits before reaching full retirement age), that figure of 67% marks a minimum of 35 years. We are witnessing new retirees waiting longer to start receiving their payments, which should help to further increase the average benefits for the public aged 67 and over.
You will also notice that the average retirement benefit levels off considerably from the age of 83. This has to do with the fact that women have a longer average life than men. Since women are more likely to stay home to raise their children or care for sick family members, their earning potential throughout life is reduced. At the age of 83, retired women represent a higher percentage of the total beneficiaries.
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Three Simple Tricks to Increase Your Social Security Benefit
For the tens of millions of American workers who are seeing these average disappointment benefit numbers, know that there are some simple things you can do to increase your eventual monthly pay.
First, waiting is a smart choice. Although deferring the benefit is not the ideal choice for everyone, a June 2019 United Income study found it to be the best choice for a surprisingly large percentage of seniors. When comparing the actual claims of 2,000 senior families with what would have been their ideal claim in terms of the greatest lifetime benefits received, 57% would have benefited from the claim at age 70. In addition, more than 80% would have been better served waiting until the ages of 67 to 70.
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Second, it is never a bad idea to think about working a little harder. By the age of 60, you may have acquired an abundance of knowledge and work skills that will result in a higher salary or salary. This higher payment can be used to replace a low-income year adjusted for inflation in your teens or 20 years, increasing your Social Security benefit.
Third and last, consider using the Social Security renewal clause, SSA-521. Officially known as “Application Withdrawal Request”, this mulligan allows retired workers who regret their early claim decision to request that it be undone. If approved by the SSA, the retiree will have to reimburse any benefits received, but will see his payment grow again by up to 8% per year. Remember that SSA-521 is only an option in the first 12 months after receiving benefits.