This article was updated on August 29, 2017, and originally published on December 16, 2016.
In the past 12 months, millions of American baby boomers have been awarded Social Security benefits, and the benefits payable to these Americans averaged $1,404. However, that amount is averaged across all newly awarded recipients, regardless of age, and thus, it may not be the best reference point for Americans retiring at their full retirement age.
Read on to learn how much you might collect in Social Security benefits if you claim Social Security at full retirement age, and what you can do to get a bigger payout.
First, some background numbers
In the 12 months ending June 2017, the Social Security Administration made 2.9 million new awards to retired workers, and the average monthly payment awarded to recipients over that one year period was $1,413.For perspective, the average monthly Social Security awarded to Americans in 2015 was $1,373. It may also be helpful to know that the average amount paid to all 41.1 million retired workers averaged $1,418 in June 2017.
The following table adds additional insight into historical norms by showing how much the average monthly Social Security payment to all retired workers has been over the past 10 years.
|Note: Average award amounts are shown in today's dollars SOURCE: SOCIAL SECURITY.|
Let's get a bit more specific
The exact amount of Social Security you will receive at full retirement age is based on a complex formula that adjusts your highest 35 years of monthly income into current dollars and then averages those amounts to come up with your average indexed monthly earnings (AIME).
Multipliers are then applied to your AIME at various income levels to determine your primary insurance amount (PIA). In 2017, the PIA is the sum of 90% of AIME up to $885, 32% of AIME up to $5,336, and 15% on any income above $5,336. The maximum benefit payable to a worker retiring at full retirement age is $2,687, however, that amount can be increased by delayed retirement credits (more on that in a minute).
Because your actual Social Security award will vary greatly from your peers because of differences in income, let's take a look at a few estimates of how much money you could receive at full retirement age at different income levels. In the following table, I assume a birth date of Jan. 1,1951, and a first payment in January 2017 at 66 years and 1 month.
Although the estimates above provide insight into your full retirement age payout, they make assumptions about your past income that might not be correct. Therefore, to get a more precise estimate of your Social Security benefit at age 66, you can use this online calculator. Or, you can create an online user ID so that you can log into Social Security's website and view your exact work history and benefit amount so far.
Getting a bigger payout
To encourage Americans to hold off claiming Social Security, the Social Security Administration offers delayed retirement credits that increase the size of your monthly check by up to 8% per year, until age 70.
Delayed retirement credits are calculated monthly, so people with a full retirement age of 67 will get a smaller increase in total monthly payment at age 70 than people with a full retirement age of 66. In 2017, the full retirement age increases to 66 years and 2 months.
For example, if your full retirement age is 66 and your monthly full retirement age benefit is $1,000, then delaying Social Security until age 70 can result in a monthly payment that's $1,320, or 32% bigger than it would be otherwise. If your full retirement age is 67, then your monthly Social Security payment at age 70 would increase by 24% to $1,240 instead.
Additionally, if you have 35 years of work history, or longer, then you could haul in a bigger benefit by continuing to work. Social Security bases your benefit on your highest 35 income-earning years, and it uses zeros in its calculation if you've worked fewer than 35 years. Therefore, each additional year you work at a high income job will replace a low income earning year or a zero in your calculation, thereby giving your benefit a welcome boost.