Social Security is an important source of income for millions of retired workers, and benefits are often the largest source for older Americans. But many adults misunderstand certain aspects of the program, and knowledge gaps can lead to poor decisions and missed opportunities.
These three questions address some of the more common misconceptions:
- How are Social Security retirement benefits calculated?
- What is the average retirement benefit for men and women of different ages?
- How can retired workers increase their benefit after starting Social Security?
Here are the answers.
How Social Security retirement benefits are calculated
Several factors determine the amount of income retired workers get from Social Security, but three play a particularly important role: work history, lifetime wages, and claiming age.
Work history and wages are the foundation of the benefits formula. Specifically, the earnings from the 35 highest-paid years of workers' careers are used to calculate their primary insurance amount (PIA), which is the benefit they receive if they claim Social Security at full retirement age (FRA).
The chart below shows how your FRA changes based on your birth year:
Image source: The Motley Fool.
Claiming age also impacts Social Security income. Workers are entitled to retirement benefits at age 62. Those who start claiming before FRA get a reduced portion of their PIA, and those who start collecting after FRA get an increase to their PIA.
For instance, workers born in 1960 who take retirement benefits at age 62 will only receive 70% of their PIA, but the same workers will get 124% of their PIA if they delay claiming until age 70. The delayed retirement credit stops at age 70, so it almost never makes sense to start Social Security later than that.
The average Social Security retirement benefit for men and women
The Social Security Administration (SSA) publishes a monthly snapshot detailing the average payment to various beneficiary groups. In June 2023, more than 49 million people received a retired worker benefit, and the average payment was $1,837.29. That figure is useful in tracking broad trends, but a more detailed breakdown can give retired workers a better sense of where they stand among their peers.
The SSA publishes a more detailed analysis of Social Security recipients at the end of each year. The chart below shows the average retired worker benefit paid to men and women of various ages in Dec. 2022.
|
Age |
Average Retired Worker Benefit for Men |
Average Retired Worker Benefit for Women |
|---|---|---|
|
62 |
$1,421 |
$1,141 |
|
63 |
$1,517 |
$1,225 |
|
64 |
$1,566 |
$1,270 |
|
65 |
$1,671 |
$1,356 |
|
66 |
$1,917 |
$1,530 |
|
67 |
$2,055 |
$1,638 |
|
68 |
$2,054 |
$1,644 |
|
69 |
$2,019 |
$1,613 |
|
70 |
$2,180 |
$1,744 |
Data source: Social Security Administration. All benefit figures are rounded to the nearest dollar.
After looking at the chart above, some retired workers might wonder if they can increase their benefit once they’ve started Social Security. The answer is yes, but only for those willing and able to go without their benefits for a while.
How to increase retirement benefits after starting Social Security
Retired workers can undo their decision to claim Social Security within 12 months of their application being approved, provided they repay any benefits (including any money withheld for Medicare premiums) they received. Anyone who wants to cancel or withdraw an application must complete a Form SSA-521.
Alternatively, retired workers who have reached FRA can suspend their Social Security benefit at any time before age 70. They need to contact the SSA by phone or mail, or visit their local Social Security office to submit the request. Benefits will automatically begin again at age 70, but retirees can also choose to resume Social Security payments earlier.
In either case, workers accumulate delayed retirement credits, meaning their benefit will increase by two-thirds of 1% every month (or 8% each year) until Social Security is reinstated. The only difference is that delayed retirement credits begin accumulating at FRA when workers undo their decision to claim Social Security. For those who have reached FRA and then choose to suspend their benefit instead, their delayed retirement credits only start accumulating the month after making that request.
