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How Much Does Social Security Really Cover in Retirement?

By Catherine Brock – Aug 29, 2021 at 10:17AM

Key Points

  • The quick answer is 33%, but there are numerous reasons why you're not the average recipient.
  • No matter what your income is today, if you still have working years ahead of you, you have time to increase your Social Security benefit.

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The income coverage stats for Social Security might surprise you.

How much does Social Security really cover in retirement? The quick answer is benefits represent roughly 33% of income for seniors.

But this quick answer might not apply to you for two reasons. One, you may not fit the "average" profile. And two, you could still have time to push your Social Security benefit higher. Read on to understand what "average" looks like relative to Social Security, and what steps you can take to earn an above-average benefit.

The average Social Security stats

As of July 2021, the average monthly Social Security benefit is $1,556.72. If you make a salary of around $4,290 monthly, that benefit would replace about 36% of your working income.

Senior couple smiling while reviewing paperwork at home in front of laptop.

Image source: Getty Images.

The percentage is almost the same when you compare the average benefit to average spending by seniors. According to the Bureau of Labor Statistics (BLS), Americans 65 or older spend an average of $4,220 monthly. That's as of 2018 to 2019, which is the most recent BLS spending data available. Using that number, the average Social Security benefit covers about 37% of senior living expenses.

If your income and spending are substantially different from those averages, you might get more or less coverage from your Social Security benefit. This is because the benefit formula provides higher income replacement for lower-wage workers and lower income replacement for higher-wage workers.

Specifically, the Social Security formula relies on income tiers, called bend points. If your average indexed monthly earnings (AIME) fall within the lowest tier, your benefit could be 90% of your working income. If you make the maximum income taxable by Social Security, your income replacement would be closer to 25%.

How to raise your benefit

If you have a few working years ahead of you, you have time to push your Social Security benefit higher. Two strategies you can use, separately or together, are to increase your average income or to delay your benefits.

Increasing your average income. Your benefit is calculated from an average of your highest-paid 35 years of working. If you have fewer than 35 years on your work record, the missing years are counted with zero income. Your taxable income this year will replace one of those zero-income years and bump up your average. If you can work long enough to replace all your zero-income years, you should see your benefit rise.

Even without zero-income years, you can still raise your average. If your current salary is higher than your lowest-income years, continuing to work should improve that average by replacing the lowest years.

You can also take steps to raise your income, by way of a promotion, second job, or work on the side. And if you hold your living expenses steady as your income grows, your higher benefit will cover a higher percentage of your costs.

Delaying your benefits. You can claim Social Security at any age between 62 and 70. You qualify for your full benefit at full retirement age (FRA) -- between 66 and 67 depending on what year you were born. If you claim before FRA, your benefit is reduced by up to 30%. If you claim later than FRA, your benefit could be up to 32% higher.

Delaying your claim is the most reliable way to increase your benefit, but there is a cost. To hold out until 70 for the highest benefit possible, you'd forgo eight years of Social Security income upfront -- possibly a six-figure income deferral in total. The higher monthly benefit can offset that delayed income eventually, but only if you live well into your 80s.

Other ways to tackle a shortfall

You can also tackle a Social Security shortfall from other angles, namely by reducing your expenses and increasing your savings. Even a 10% expense reduction could give you some breathing room.

And if you can trim your expenses now while you're working, you can use the savings to bolster your emergency fund and/or your retirement account.

Securing a comfortable retirement

Social Security may replace 30% to 40% of your income, or less if you earn an above-average salary. You can take steps to raise your benefit, like increasing your average income or delaying your claim. But also evaluate your expenses and savings for additional opportunities.

A tweak here and a tweak there could get your budget in balance, giving you a more comfortable, relaxing retirement.

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