Retirement income looks different for everyone, but one thing that is common for tens of millions of Americans is Social Security.
The role that Social Security benefits play in a person’s retirement finances will vary, but many people will tell you how valuable Social Security is to their livelihood. That’s why it’s valuable to have an idea of how much you can receive so you can start planning your retirement finances accordingly.
Start your morning smarter! Wake up with Breakfast news in your inbox every market day. Register for free »
The exact amount of a person’s Social Security benefits will vary based on his or her earnings and stated age, but knowing the average benefit at certain ages is helpful in planning. For 72-year-old Social Security recipients, the average monthly benefit (at time of writing) is $1,915.61.
Your full retirement age (which is based on your year of birth, as shown below) is when you become eligible for your basic monthly Social Security benefit, called the primary insurance amount (PIA).
Using your PIA, Social Security then calculates your monthly benefit based on when you file versus your full retirement age.
If you delay benefits until after your full retirement age, they will increase by 2/3 of 1% per month (8% per year) until you turn 70. After age 70, monthly benefits no longer increase, so that’s realistically the latest age at which someone should be claiming Social Security.
Someone who initially applies for benefits at age 70 or 72 would receive the same amount, but their benefit would likely be different at age 72 if they claim benefits at age 70, because of the annual cost adjustment of subsistence (COLA).
On the other hand, claiming benefits before your full retirement age will reduce the monthly payout.
If you are within 36 months of your full retirement age, Social Security will reduce benefits by 5/9 of 1% each month. Each additional month thereafter reduces the benefit further by 5/12 of 1%. Assuming your full retirement age is 67, claiming benefits at age 62 (the earliest you can claim) would reduce your monthly benefit by 30%.
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could give your retirement income a boost. For example, one simple trick can earn you as much as $022,924 more… every year! Once you learn how to maximize your Social Security benefits, we think you can retire confidently, with the peace of mind we’re all looking for. Click here to find out how you can learn more about these strategies.
