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 past 12 months, the Social Security Administration has made 2.9 million new awards to retired workers, including 199,000 new awards in November. The average monthly payment that's been awarded to recipients over the past year and in November alone, regardless of age, is $1,404.24 and $1,378.92, respectively.
For perspective, the average monthly Social Security awarded to Americans in 2015 and November 2015, respectively, was $1,373.81 and $1,363.23. Also, it may be helpful to know that the amount paid to all 41.1 million retired workers averaged $1,354.78 last month.
For additional context, this table shows how much the average monthly Social Security payment has been over the past 10 years to all retired workers.
Getting 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 next year, however, that amount can be increased by delayed retirement credits (more on that in a minute).
Because your actual Social Security award will vary widely from your peers because of differences in income, let's take a look at a few estimates of how much 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.
Those estimates provide you with more insight into your full retirement age payout, but these estimates make assumptions regarding your past income, based on the income listed in the table. To get a more precise estimate, you can use this online calculator, or create an online user ID so that you can log into Social Security's website and view your work history and anticipated benefit.
Getting a bigger payout
To encourage Americans to hold off on claiming Social Security, the Social Security Administration offers delayed retirement credits that can increase the size of your monthly check by up to 8% per year, until age 70.
The benefit of delayed retirement credits is calculated monthly, so people with a full retirement age of 66 will get a smaller increase in total monthly payment at 70 than people with a full retirement age of 67. 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, delaying Social Security payments until 70 can result in a monthly payment that's 32% bigger, or $1,320. If your full retirement age is 67, your monthly Social Security payment at 70 would increase by 24% from $1,000 to $1,240.
Additionally, if you have 35 years, or longer, of work history, a bigger benefit could come from continuing to work. Since Social Security bases your benefit on your highest 35 income-earning years, working an additional year at a high income will replace a low income earning year in your calculation, thereby giving your benefit a boost.
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