Do you know what the average Social Security benefit is in 2022? If you aren't yet retired or nearing the time you'll claim these benefits, chances are you have no clue what this number is.
While it's understandable not to know the details about retirement benefits if you haven't yet claimed them, you should at least know what the average benefit this year is. And there's a simple reason for that. Finding out what the typical retiree gets in Social Security income may shock you. And that shock will hopefully prompt you to make some real decisions about your own retirement plans.
The average Social Security benefit in 2022 is probably much lower than you think
In 2022, the average Social Security benefit has been calculated as $1,657 per month, or $19,884 per year.
That's the total amount of money a typical U.S. senior receiving benefits is entitled to. Of course, your own payment is likely different from this average based on certain circumstances, such as if you have taxes taken out of your paychecks, if Medicare premiums are withdrawn from your payment, if you claim benefits early, or if you earned less than your peers or worked for a shorter period of time than the average American.
Because it's an average, some retirees will get more than this -- with a max monthly benefit as high as $4,194 -- the reality is that the Social Security checks most people get are for way less than many people anticipate receiving. For those who are hoping Social Security will take care of covering at least their essential costs in retirement, finding out how low the average benefit is can be a huge shock.
Why is the average Social Security benefit so low?
Many people are surprised how low Social Security's average benefit because of some basic misconceptions about what these benefits are supposed to accomplish.
Social Security is widely viewed as a government program that supports elderly Americans, but it's not. It's a program meant to help older people make ends meet in their later years to keep them out of poverty. But it is not, and never was, intended to be the only income seniors have coming into their household.
Instead, Social Security was meant to serve as one of three crucial income sources, with the other two including a pension benefit from an employer and savings employees amassed over the course of their careers. Over the years, however, employers have gradually replaced pensions that provide guaranteed income with 401(k) accounts that come with no promises as to how much money they'll offer.
The virtual elimination of pensions for the majority of workers has left most people with two income sources: Social Security and savings. And Social Security hasn't changed to accommodate this reality. So savings goals must change instead.
Social Security benefits were originally designed to replace about 40% of preretirement income. Since the formula used to calculate them hasn't changed and is unlikely to, they're still intended to do that. This means most people must save enough to also replace about 40% to 50% of what they were earning, since experts generally agree that an 80% to 90% replacement rate is appropriate.
Whether you have a workplace 401(k) or not, no one is going to be responsible for making sure you have enough invested for retirement to fill the role that both savings and pension benefits were supposed to play in retirement. So to make sure you don't find yourself facing a lot of unnecessary stress and hardship as a retiree, make certain you're investing enough to do that.