Social Security is a key source of income for millions of retired workers, but many Americans are misinformed about the program. For instance, among adults not currently receiving benefits, 44% have no idea how much monthly income Social Security will provide, according to Nationwide. That can lead to trouble when planning for retirement.
On average, Social Security benefits replace 40% of preretirement earnings, according to the Social Security Administration (SSA). Last year, the average monthly benefit paid to newly retired workers was $1,754. But the age at which you claim Social Security plays a big role in determining how much income benefits will provide.
Here's what you should know.
Image source: Getty Images.
How Social Security benefits are calculated
The size of your retirement benefit is based on your lifetime earnings and your age when you claim Social Security. Retired workers who claim Social Security before full retirement age (FRA) are permanently penalized with a reduced benefit, while retired workers who claim Social Security after FRA are permanently rewarded with an increased benefit.
Retired workers who claim Social Security benefits at age 62
Male life expectancy at age 62 is about 20 years, and female life expectancy is about 23 years, according to the SSA.
Men: In 2021, the average benefit paid to retired men who claimed Social Security at age 62 was $1,366 per month, or $16,392 per year. Assuming a life expectancy of 20 years, income from Social Security benefits would total $327,840.
Women: In 2021, the average benefit paid to retired women who claimed Social Security at age 62 would have been $1,089 per month, or $13,068 per year. Assuming a life expectancy of 23 years, income from Social Security benefits would total $300,564.
Retired workers who claim Social Security benefits at full retirement age (FRA)
Full retirement age ranges from 66 to 67, depending on your birth year. Male life expectancy at FRA is about 17 years, and female life expectancy is about 20 years, according to the SSA.
Men: In 2021, the average benefit paid to retired men who claimed Social Security at FRA was $2,300 per month, or $27,600 per year. Assuming a life expectancy of 17 years, income from Social Security would total $469,200.
Women: Last year, the average benefit paid to retired women who claimed Social Security at FRA was $1,823 per month, or $21,876 per year. Assuming a life expectancy of 20 years, income from Social Security would total $437,520.
Retired workers who claim Social Security benefits at age 70
Male life expectancy at age 70 is about 15 years, and female life expectancy is about 17 years, according to the SSA.
Men: In 2021, the average benefit paid to retired men who claimed Social Security at age 70 would have been $3,156 per month, or $37,872 per year. Assuming a life expectancy of 15 years, income from Social Security benefits would total $568,080.
Women: In 2021, the average benefit paid to retired women who claimed Social Security at age 70 would have been $2,470 per month, or $29,640 per year. Assuming a life expectancy of 17 years, income from Social Security benefits would total $503,880.
How much income from Social Security benefits can you expect in retirement?
As discussed, life expectancy changes as you age. For instance, male life expectancy at birth is 76 years, but males who actually live until age 76 have a life expectancy of almost 11 years. That means the decision regarding when to claim benefits should be based in part on your life expectancy.
With that in mind, this chart is based on life expectancy at age 62 -- the age at which eligibility for Social Security retirement benefits begins. In other words, the chart assumes men across all three age groups will live until age 82, and it assumes women across all three age groups will live until age 85.
Additionally, the chart is based on the average retirement benefit paid to new beneficiaries who started Social Security at age 62 in 2021. Anyone who turned 62 (and claimed Social Security) last year would have seen their benefit reduced by 29.17%. I have reversed that reduction to estimate the Social Security income for individuals who claim at FRA.
Similarly, anyone who turned 62 in 2021 would have received a 25.3% delayed retirement credit if they had claimed Social Security retirement benefits at age 70. I have accounted for that credit to estimate the Social Security income for individuals who claim at age 70.
|
Retired Workers |
62 Years Old |
Full Retirement Age |
70 Years Old |
|---|---|---|---|
|
Men |
$327,840 |
$351,010 |
$348,060 |
|
Women |
$300,564 |
$335,181 |
$346,845 |
Data source: Chart by Author.
Individuals at age 62 can use the chart above to approximate how much total income they might receive from retirement benefits based on when they claim Social Security. However, the exact amount you receive will depend on your lifetime earnings. For a more precise estimate of your future benefits, you can use the my Social Security account portal.
As a caveat, it is impossible to predict the cost-of-living adjustments (COLAs) that will be applied to benefits in the coming years. But COLAs are designed to offset the impact of inflation, meaning they theoretically leave the buying power of benefits unchanged. In other words, the income figures provided in the chart express buying power in 2021 dollars.
