Social Security benefits are an important source of income for most older Americans. And, the good news is, the typical senior will see a little more money next year with the average retirement benefit rising.
If you're collecting Social Security, your benefits will be going up. Wondering how much your increase will be -- and how it will compare to the average benefit your peers will receive? Here's what you need to know.
This is the average Social Security benefit in 2022
In 2022, the average benefit that seniors will receive is $1,657 among all retired workers. This is up $92 from the average benefit of $1,565 at FRA in 2021. The average benefit is going up because retirees are getting a 5.9% cost of living adjustment (COLA).
COLAs are awarded in most -- but not all -- years in order to help benefits maintain their buying power. Since prices rise each year, Social Security benefits would purchase much less over time without COLAs. That's why prices on a consumer price index called CPI-W are compared each year. If CPI-W shows a year-over-year increase, retirees see more money in their Social Security checks starting in January.
How to figure out how your benefit compares to the average
So how will your benefit compare to the average next year? You'll need to know what your benefit will be to find out.
If you're already retired and receiving Social Security income, simply multiply the amount of your current check by 5.9% to account for the COLA and see how much your new monthly income will be. If you're currently receiving $1,100 per month, for example, your payment amount next year would go up to around $1,165 after the 5.9% COLA was applied.
However, you won't necessarily get a check for this amount, as some of your annual raise will be eaten up by a likely increase in Medicare premiums. Still, doing this math can give you a good idea of what your new income will be and how it compares to what your peers are getting.
If you haven't yet started your Social Security checks but are planning to, you can sign into your mySocialSecurity account to see what your monthly income will be based on the age when you file for benefits. You can compare it to the national average.
Regardless of what you find, remember that an average benefit means many retirees get more and many get less than that average. If your benefit is below $1,657, it may be because you claimed it early. Retirees see a reduction their monthly checks if they file before their full retirement age. Your benefit could also be below the average if you earned less than your fellow Americans or had a short career history, as benefits are based on wages over a 35-year career.
If your benefit is above average, on the other hand, it's likely because you earned more than most of your peers or waited to file for checks.
Whether you beat the average, come in below it, or earn right around that amount, it's also worth remembering that you can't live on Social Security alone. So be sure you have plenty of supplementary savings to support you if you're considering retiring. And if you've already left the workforce, aim to maintain a safe withdrawal rate so your nest egg can continue to provide for the expenses Social Security doesn't cover.