Tens of millions of people rely on Social Security for the income they need in retirement. The program is designed to help just about everybody, and most of us need all the help we can get. For those who earn the median household income of $63,000 per year, even an ambitious saving program can leave you behind in achieving your financial goals for retirement. That's why knowing how much Social Security you'll get can be a great help in planning out your financial future. Here, we'll look at the numbers that go into calculating what Social Security pays the typical American earner based on recent figures.

What you can expect to pay in taxes toward Social Security

The first thing to note is that those who make $63,000 can expect to pay a substantial amount of taxes to go toward Social Security. The current tax rate of 6.2% applies to the first $137,700 in earnings, so you'll end up paying that 6.2% on your full earnings. That works out to $3,906. Your employer will also match that $3,906 to cover the employer portion of your Social Security payroll tax. Those who are self-employed end up being responsible for the combined $7,812.

Brass key on top of four Social Security cards.

Image source: Getty Images.

Those making $63,000 a year will also easily qualify for the maximum of four Social Security work credits for the year. Work 10 years making that much, and you'll get the 40 credits you need to qualify for retirement benefits from Social Security when the time comes.

What Social Security looks at to determine your benefit amount

Your Social Security payment will be based on your entire work history, with the Social Security Administration focusing on the top 35 years of your career as measured by inflation-adjusted wages. If you have a shorter career than that, then the SSA will put in zeros for the missing years, bringing your average earnings down and thereby reducing your benefit amount.

That's different from how some private pensions work, as they often look at just one to three years of your highest earnings in your career. Here, it can make a huge difference whether you made $63,000 throughout your career or got a big raise to get you up to that mark at some point.

What Social Security will pay you when you retire

To make things simpler, we'll assume for these purposes that you got a typical inflation-based raise every year of your career and expect to work a full 35 years. That would make the average inflation-indexed monthly earnings $5,250. For those who first become eligible to take Social Security benefits in 2020, the following numbers go into figuring out how much Social Security you can get:

  • You get 90% of the first $960 in average indexed monthly earnings. That works out to $864.
  • Then, you get 32% of the amount up to $5,785 per month. In this example, that takes care of the remaining $4,290, and 32% of that amount is $1,372.80.
  • Add those two figures together, and you'll get $2,236.80 per month.

That number gives you what you'll receive if you wait until your full retirement age before claiming your benefits. If you intend to claim at the earliest possible age of 62, then you'll need to adjust that figure downward to reflect the early claiming penalty. For someone turning 62 in 2020, full retirement age is 66 and eight months, so claiming 56 months early will reduce your benefits by 28 1/3%. The monthly amount would be $1,603.

Conversely, if you hold off until after your full retirement age to claim Social Security, you can get an extra 8% for every year you wait. That bonus stops at age 70, but you could still get a 26 2/3% benefit boost by waiting until then. That'd give you $2,833 per month.

A nice chunk of change from Social Security

You can see how essential a role Social Security plays by looking at these numbers. The $2,237 figure at full retirement age would replace between 40% and 45% of your pre-retirement pay, and that takes a lot of the burden of coming up with retirement income off your shoulders.

That doesn't mean you can afford not to save for retirement. Middle-income earners have a lot to gain from retirement saving, but knowing that Social Security  will carry its fair share of the load is a good thing.