Asking how much you will get from Social Security is a question well worth asking in light of how much our paychecks shrink thanks to Federal Insurance Contributions Act (FICA) deductions. Will we ever get that money back, and if so, will the return be a fair amount?
Believe it or not, on average we do ultimately end up getting our FICA deductions back, and then some. People earning a six-figure income often even reach the maximum monthly Social Security benefit if they've earned good enough money in their working years.
Before lamenting the unfairness of the Social Security Administration's (SSA) math, however, know that the SSA is also working with a maximum amount of individual income it's able to tax for the purpose of funding Social Security.
The rough math
If you're making $100,000 per year right now, congratulations! You're roughly tripling the Social Security Administration's estimated 2019 median annual earnings of $34,248, and doubling the average individual yearly earnings of $51,916 -- a figure that's skewed higher by a handful of super-earners. The United States Census Bureau further estimates that 2019's median household income was $68,703, for additional perspective.
But what does this above-average level of income mean in practical terms when it comes time to collect benefits?
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It can be complicated. The length of time you've earned this sort of money is a factor, as is your age at the point you intend to retire. If you've only earned $100,000 later in life, you've not contributed as much to the Social Security pool, so you aren't entitled to take as much out.
If you're retiring at the age of 70 instead of at the minimum eligibility age of 62, you'll get more, since you'll be withdrawing from the Social Security fund for a shorter time.
Broadly speaking, though, if you're retiring from a six-figure job at the age of 65 this year and have grown your earnings at a typical pace over the course of the past 40 years, you'll be cashing monthly Social Security checks worth around $2,000.
Take that number with a huge grain of salt, however, particularly if you've earned $100,000 (or more) for the better part of your career. If you've been a six-figure sort of employee for the past 20 years, your monthly benefit is worth something nearer $2,400 if you're retiring this year.
At the other end of the spectrum, a 65-year-old earning the median income of $36,000 per year right now after building up that paycheck at a typical rate for the past 40 years will be collecting a more modest $1,000 per month from the Social Security Administration.
These are only rough numbers, but they still provide an important ballpark figure for what to expect.
The average monthly Social Security check for 2020, by the way, was $1,544. The maximum-allowed monthly benefit currently stands at just over $3,100 for folks retiring at the age of 62 this year, but is pumped up to just under $3,900 for anyone who's waited until age 70 to start collecting.
While there's a cap on the size of these checks, bear in mind there's also a cap on how much of your income is subject to FICA tax. The Social Security Administration takes out 6.2% of your earnings up to the first $142,800 (or twice that rate if you're self-employed). Any income above and beyond that figure isn't subject to additional FICA taxes. Of course, it is subject to higher income tax rates.
Only part of a bigger plan
Regular Social Security checks worth between $2,000 and $2,400 per month are great, but if you've grown accustomed to a salary of $100,000 or more, that amount may not fund the sort of retirement lifestyle you're 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. That's 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 doesn't really require a six-figure income. It's 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.
