Warren Buffett is one of the wealthiest people in the world, with a stake in Berkshire Hathaway that's worth tens of billions of dollars. Buffett is just about the last person who needs the financial support that Social Security provides to retirees, but the Social Security program doesn't have any limits based on a recipient's financial means.
At age 87, Buffett has been eligible to receive Social Security for a long time. Thanks to the highly predictable way in which the Berkshire CEO gets paid, it's possible to run the numbers and get a rough idea of how much the Oracle of Omaha should be eligible to receive from Social Security.
Why you can guess what Buffett gets from Social Security
The reason why it's possible to get an idea of what Buffett gets in Social Security benefits is that the Social Security Administration bases its monthly retirement payments on a person's career earnings. The SSA looks at a person's 35 top-earning years after adjusting each annual amount for inflation, and it then calculates what's known as average indexed monthly earnings. From there, the figure goes through an SSA formula that determines a person's primary insurance amount. That's the base amount that a retiree is entitled to receive at full retirement age, but the actual payment can be higher or lower depending on whether the person claims benefits later or earlier than full retirement age.
Buffett has been very public in revealing his salaries over the years. In Berkshire's proxy statement for its annual meeting in 1999, the company revealed that Buffett had earned $100,000 each year for the past 18 years, dating back to 1981. That practice has continued to the present day.
Prior to that, reports are somewhat less complete. However, some secondary sources refer to Buffett getting a smaller $50,000 salary from Berkshire for at least a couple of years prior to 1981. Others point to Buffett's initial job working for Ben Graham's partnership, receiving a starting salary of $12,000 a year in 1954.
Fortunately, it's not necessary to know exactly how much Buffett made in order to calculate what he probably gets from Social Security. That's because the SSA has already done it for us, because Buffett is one of a select few people who has consistently earned more than the maximum amount on which Social Security charges payroll taxes. It wasn't until 2008 that the wage base limit on Social Security exceeded Buffett's $100,000 Berkshire salary, thus guaranteeing that for at least 28 years, Buffett earned the maximum amount. A $12,000 salary in the 1950s would have been well above the wage limit for Social Security at that time, as would a $50,000 salary in the 1970s. It's therefore reasonable to assume that Buffett's earnings record entitles him to the maximum benefit.
The choices Buffett would have had
Like anyone, Buffett had to choose when to take Social Security benefits. If he'd claimed at the earliest available age of 62 back in 1992, then the maximum initial monthly payment would have been $860 per month. Thanks to cost of living adjustments along the way, that number would work out to $1,527 per month in Social Security benefits today.
Based on his birth year of 1930, Buffett's full retirement age was 65. If he waited until then before claiming benefits, then he would have gotten an initial monthly amount of $1,199 in 1995. That would have grown to $1,961 per month today.
Yet Buffett didn't really have much need to collect Social Security, and so it would have been reasonable for him to wait until the latest possible age of 70 before claiming. If he did so, then he would have been entitled to an initial monthly benefit of $1,752 in 2000. Over the following 18 years, cost of living adjustments would have boosted that amount to $2,562 per month.
The interesting thing about Buffett and Social Security
Buffett has ideas about dealing with Social Security's financial issues. One solution he's suggested has been to eliminate the wage base limit on Social Security taxes, thereby increasing the amount of revenue that the program brings in. In particular, those executives who make millions of dollars in salaries and other compensation would see the amount they had to pay into Social Security through payroll taxes skyrocket.
Yet what's somewhat ironic about that idea is that Buffett wouldn't have had to pay markedly more in payroll taxes under his proposal. Taxes on the full $100,000 would have amounted to $6,200 annually since 1990, with lower tax rates having applied in earlier years. Yet because he kept his salary low compared to his peers, he never would've had to pay the gargantuan taxes that executives with seven- or eight-figure salaries would pay under his proposal.
It's amusing to think of the billionaire investor getting a $2,562 check from Social Security deposited into his bank account every month. Yet Buffett's experience shows how every worker, rich or poor, stands to benefit from the Social Security program.