Although they don't really need it, many billionaires do qualify for and receive Social Security retirement benefits. Even Warren Buffett, one of the richest men in the world, collects a Social Security benefit.
You may think billionaires generally qualify for the maximum possible Social Security benefit, and in many cases, you'd be right. However, because of the nature of the Social Security program, that's not always the case.
The maximum Social Security benefit in 2017
Social Security is calculated by looking at all of your earnings throughout your career, and adjusting each year's total to account for inflation. Your 35 highest-earning years, up to each year's Social Security taxable maximum earnings, are then averaged and divided by 12 to determine your lifetime average monthly earnings.
Once your monthly average is determined, it is then applied to a formula:
- 90% of the first $885
- 32% of the amount between $885 and $5,336
- 15% of the amount above $5,336
You can use this worksheet from the Social Security Administration to estimate your own Social Security benefit, or to calculate the maximum, but to save you the math, the highest possible monthly benefit a newly retired American could get in 2017 is $2,687 at full retirement age. Waiting to claim beyond full retirement age results in a permanent 8% increase per year, and the full retirement age for people reaching retirement age now is 66, so this benefit can be increased by as much as 32%.
So, as long as a billionaire's income was greater than the maximum taxable Social Security wages in each of at least 35 years, he or she would be entitled to $2,687 per month at full retirement age, or as much as $3,547 if they wait until age 70 to claim their benefit.
One big caveat
Now that we've looked at how big a Social Security benefit can be, it's also important to point out that only earned income is taxed for Social Security purposes, and therefore is what's considered when determining someone's Social Security benefit. In other words, the billionaire's income considered must have come from a job or from self-employment. Income from other sources, such as dividends, investment gains, interest income, inheritance, passive business income, and several others do not count toward Social Security qualification.
In other words, if a billionaire inherited their fortune, and their only source of annual income throughout their lifetime was interest and dividends on their investments, it's entirely possible that a billionaire wouldn't qualify for Social Security at all.
To qualify for a Social Security retirement benefit, at a minimum, you need to have at least 40 quarters (10 years) of income from a covered occupation.
Finally, if a billionaire had earned income for more than 10 years, but fewer than 35, he or she would be entitled to a Social Security retirement benefit, but one that's less than the maximum.
Should billionaires get Social Security?
Another frequently debated issue is whether or not billionaires and other wealthy individuals should be entitled to Social Security benefits.
It's no secret that Social Security isn't in the best financial shape right now. In fact, if nothing is done, the program's reserves are expected to be depleted by 2034, at which point across-the-board benefit cuts will be necessary.
One potential way to help boost Social Security's finances would be to "means-test" benefits, which means reduced or even eliminated benefits for retirees who didn't need the money. Since more than 47,500 millionaires receive Social Security benefits totaling $1.4 billion annually, this could certainly help fix the program's long-term viability.
Having said that, it's important to mention that the idea of any Social Security cut (including means-testing) is widely unpopular, so I don't see this as a particularly likely scenario. However, it's certainly a possibility, especially with a Republican Congress and a Republican in the White House.