More than 52 million Americans got a Social Security retirement benefit in October. The vast majority of those beneficiaries were retired workers, but nearly 2 million were the spouses of retired workers. Readers surprised by that information are not alone.
A recent survey from MassMutual found that 28% of adults nearing retirement were unaware that spouses could claim Social Security benefits on the work record of their retired partners. Knowledge gaps like that lead to poor financial planning and lost income in retirement.
Read on to see the average Social Security benefit for retired workers and spouses, and to learn how beneficiaries can score bigger payouts.
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The average Social Security benefit for retired workers and spouses
The Social Security Administration publishes a monthly snapshot detailing the average payout to different types of beneficiaries. The amounts listed below were the average benefit payments in October 2023:
- Retired workers: $1,843.96 per month ($22,127.52 per year)
- Spouses of retired workers: $887.27 per month ($10,647.24 per year)
The average Social Security benefit is a useful benchmark. It tells retirees and their spouses where they stand compared to the broader population, and it gives workers a sense of how much income Social Security might provide in the future.
However, knowing the average benefit is not sufficient for any sort of financial planning. Social Security payouts vary widely and beneficiaries need to understand exactly how retirement benefits are calculated.
How Social Security benefits for retired workers are calculated
The Social Security benefit paid to a retired worker depends on work history, lifetime income, and claiming age. Workers can think of the calculation as a two-step process:
- Step 1: Wages from the 35 highest-earning years of work are adjusted for inflation and converted to a monthly average known as the average indexed monthly earnings (AIME) amount. A formula is applied to the AIME to determine the primary insurance amount (PIA), also called the basic Social Security benefit. The PIA is the payout a worker would receive if they claimed Social Security at full retirement age (FRA).
- Step 2: The PIA is then adjusted for early or delayed retirement. Workers are entitled to retirement benefits at age 62, but starting Social Security before or after FRA has consequences. Workers that take retirement benefits before FRA receive a smaller payout, meaning they get less than 100% of their PIA. But workers that delay retirement benefits beyond FRA get a bigger payout, meaning they get more than 100% of their PIA. That said, it never makes sense to claim any later than age 70, because delayed retirement credits stop accumulating beyond that point.
Here's the bottom line: Workers can increase their future retirement benefits by ensuring they remain employed for at least 35 years, earning as much money as possible while employed, and delaying Social Security benefits (up to age 70).
How Social Security spousal benefits are calculated
The Social Security benefit paid to the spouse of a retired worker depends on the PIA of the retired worker and the claiming age of the spouse. Specifically, the spousal benefit amount will be half of the retired-worker PIA if the spouse files for Social Security at FRA. The age of entitlement is still 62, but spouses who take retirement benefits before FRA will get a smaller payout, meaning they will receive less than 50% of the retired-worker PIA.
There are two important differences between retired-worker benefits and spousal benefits. First, spouses can claim Social Security on the work record for their retired partner only if that partner is also collecting Social Security benefits. Second, spouses cannot earn delayed retirement credits, so there is no advantage to claiming Social Security after FRA.
Here's the bottom line: Social Security spousal benefits are a team effort. A worker can increase the retirement benefit paid to their spouse by increasing their own PIA, which means working for a minimum of 35 years and maximizing income during that time. Likewise, spouses can increase their own retirement benefit by delaying Social Security (up to FRA).
