You've spent a lifetime contributing money to Social Security, so it's fair to wonder how much you'll collect when you retire. I won't keep you in suspense. The average person collecting Social Security is pocketing \$1,553.68 per month in 2021, according to the Social Security Administration (SSA).

That may or may not sound like a lot. Social Security income depends on a lot of things, so you could be in store for a much bigger or smaller payday when you retire.

## How Social Security calculates benefits

To determine how much money you'll receive in benefits, Social Security's formula considers the length of your work history, the amount of money subject to payroll taxes you earned over your career, and when you first decide to collect benefits.

IMAGE SOURCE: GETTY IMAGES.

First, Social Security determines your average indexed (inflation-adjusted) monthly income, or AIME. It does this by applying its average wage index to your income history and then calculating the average monthly income based on your 35 highest-earning years. They include zeros for any of your 35 years without income.

Second, the SSA reduces your AIME by fixed percentages at three different income levels called "bend points." For example, if you're first eligible for retiree benefits in 2021, you'd get credit for 90% of your AIME up to \$996, 32% of your AIME between \$997 and \$6,002, and 15% of your AIME for anything above \$6,002. The resulting figure is your primary insurance amount, or PIA.

Third, Social Security only pays your PIA if you retire at full retirement age, which ranges from age 66 to age 67. Retire earlier than that, such as when you're first eligible at age 62, and you'll receive less than your PIA. Retire after full retirement age, and you'll receive a bigger benefit, thanks to delayed retirement credits (more on that in one minute).

## Digging into the data

The variability in how much money people receive in Social Security benefits might surprise you. For example, men receive an average payment of \$1,723.82 per month, while women receive an average of \$1,388.08.

The difference is likely because Social Security's formula penalizes people with fewer than 35 years of work history, and many women take time away from their careers to raise children, putting them at a disadvantage in attaining a 35-year work history. Wage inequality likely plays a role, too, because benefits are based on average incomes.

The variability in Social Security income, regardless of gender, is substantial, as well. Most people receive between \$800 to \$1,900 per month in benefits. However, about 2.5 million Americans collect over \$2,600 per month, thanks to Social Security maximizing strategies.

IMAGE SOURCE: AUTHOR'S CHART USING SOCIAL SECURITY ADMINISTRATION DATA.

## Giving your Social Security a big boost

The best way to increase your Social Security benefit is to increase income subject to payroll taxes during your career. Consistent pay increases at your primary job are important, but a second job might make sense if a raise from your employer isn't in the cards. A word to the wise, though: Make sure any extra income you earn is subject to payroll taxes, because if the earnings aren't reported, it won't increase your Social Security benefit.

Another way to bump up your Social Security is to make sure there aren't any zero earnings years in your work history. If you haven't attained a 35-year work history yet, delaying retirement or working in retirement could give you a raise, because those extra years of income will replace zeros in your AIME calculation.

Finally, you can also consider taking advantage of delayed retirement credits. Those credits can add up to 8% annually to your benefit for every year you wait to claim Social Security beyond full retirement age, up to age 70.