Whether you're aware of it or not, Social Security plays a big role in providing a financial foundation for our nation's retired workforce. Each month, more than 43 million retired workers age 62 and older receive a benefit check, and more than 3 out of 5 of these aged beneficiaries lean on the program to provide at least half their monthly income. Suffice it to say, without Social Security to provide a guaranteed monthly payment, we'd probably have a serious elderly poverty problem on our hands.
Yet, the reality of Social Security is that the average monthly payout isn't as high you'd think. According to data from the Social Security Administration (SSA), the average retired worker brought home only $1,414.73 in July 2018. That's less than $17,000 a year in income for the average person -- but apparently enough to lift more than 15 million seniors out of poverty. Helping low-income seniors who can no longer generate a working wage for themselves is, after all, why Social Security was signed into law in 1935.
But among the odd quirks we've witnessed over the decades is a shift in whom Social Security is actually helping. Rather than being a savior to low-income aged workers, as designed, Social Security benefits are instead heading to the wealthy, who in many instances aren't reliant on their benefits in any way. Since the wealthy have no financial barriers to preventative doctor visits, medical care, and prescription drugs, they're handily outliving lower-income individuals and families, thereby receiving an above-average benefit for an extended period of time.
Donald Trump qualifies for a sizable monthly Social Security benefit
President Trump is the perfect example of an individual who would benefit handsomely from Social Security today. Although, to be clear, since he didn't release his tax returns, it's uncertain if he's actually receiving a Social Security benefit, even though he qualifies for one.
Whereas the average retired worker takes home $1,414.73 a month, President Trump could be netting more than double this amount -- or maybe well over triple, inclusive of an added bonus we'll get to in a moment -- as a result of his hefty annual earnings throughout his lifetime. The easiest way to max out your lifetime Social Security benefit is to earn more than the maximum taxable payroll cap each year ($128,400, as of 2018) for at least 35 years -- and the president easily surpassed this mark. The SSA will take your 35 highest-earning, inflation-adjusted years into consideration when calculating your benefit at full retirement age.
If we assume that President Trump is receiving Social Security benefits, he could be taking home anywhere from $1,979 a month, if he claimed as soon as possible at age 62 in 2008, to $3,658 a month, if claiming at age 70 in 2016. At his full retirement age (66 in the year 2012), Social Security caps its payout at $2,699 in 2018. Over the course of a year, his work and earnings history could net him:
- $23,748 for claiming at 62.
- $32,388 for claiming at 66.
- $43,896 for claiming at 70.
Why such a big difference? This has to do with Social Security passing along an approximately 8% increase to your benefit for each year that you hold off on your claim. Though waiting doesn't always make sense, for President Trump, it could mean more than $20,000 a year in added income.
Trump also qualifies for a rarely used Social Security bonus
However, he also qualifies for a little-known bonus that went to just 1.1% of all Social Security beneficiaries (673,000) during the month of July: benefits for children.
One of the odd quirks of Social Security (and trust me, this is just one of a handful), is the fact that young children of a qualified retired parent (or parents) can receive a Social Security benefit. According to the SSA, children of a retired worker can qualify for a benefit if they are unmarried and:
- Under the age of 18, or
- Between 18 and 19 years old and a full-time student in no higher than 12th grade, or
- 18 or older with a disability that began before age 22.
If senior parents have a child who is unmarried and fits one of these other qualifications, their child can receive up to half of what their monthly retirement benefit would be at full retirement age, regardless of when they make their initial claim. In President Trump's case, his son Barron, who turned 12 in March, would qualify to receive half of his father's full retirement age monthly benefit until he turned 18 (or slightly longer if he's still in high school at that age). The catch is simply that the combined benefit being paid to the family (assuming other children or spouses qualified for a benefit based on a retired workers' earnings history) can't top 150% to 180% of the retired workers' monthly payout.
Since President Trump's full retirement age maximum payout is $2,699 a month, Barron could boost that payout by roughly $1,350 a month. Adding in this bonus to the claiming options discussed above, he could be netting the following from Social Security:
- $39,942 annually, if claimed at age 62
- $48,582 annually, if claimed at age 66
- $60,090 annually, if claimed at age 70
Mind you, the president claiming at age 70 and leaning on his Barron bonus would allow him to earn significantly more in Social Security income per year than the average household does in median wage income. Not too shabby for someone who doesn't need Social Security income, but also a telltale sign that Social Security reforms are sorely needed.
The Motley Fool has a disclosure policy.