For more than eight decades, Social Security has been providing a financial foundation for America's aging workforce. Based on more than two decades of annual surveys conducted by national pollster Gallup, anywhere from 80% to 90% of retirees lean on their monthly Social Security check to cover at least some portion of their expenses.
What's interesting is that even though America's top retirement program is vital to the financial well-being of tens of millions of current and future retired workers, the payouts provided on a monthly basis are fairly modest. In 2022, a worker with average lifetime earnings would see 37% of their previous wages/salary replaced by their Social Security benefit at age 65.
Nevertheless, the average Social Security retired worker benefit has changed meaningfully since the program's inception. Let's take a closer look at how the average Social Security check has grown each year for retired workers since 1950.
These four items are used to calculate your Social Security check
Before digging into precisely how much retired workers have received each month over the past 74 years, it's important to first understand how the Social Security Administration (SSA) determines retired worker benefits.
When broken down to the basics, four items are used by the SSA to calculate Social Security checks:
- Work history.
- Earnings history.
- Full retirement age.
- Claiming age.
The two initial factors, work history and earnings history, are linked at the hip. The SSA will account for your 35 highest-earning, inflation-adjusted years when calculating your retired worker benefit. This means if you earn more, on average, during your lifetime, there's a good chance you'll receive a higher monthly benefit during retirement. But for every year less than 35 worked, the SSA will average a $0 into the calculation, which will be detrimental to your eventual payout.
The third component, your full retirement age, is determined by your birth year. It represents the age at which you become eligible to receive 100% of your retired worker benefit. For decades following Social Security's inception, the full retirement age was 65. The Social Security Amendments of 1983 gradually raised the full retirement age to 67 for anyone born in or after 1960.
The fourth item the SSA uses to calculate monthly Social Security checks, and the one that can really alter what you'll receive on a monthly basis, as well as during your lifetime, is your claiming age. Although eligible beneficiaries can begin taking their payout at age 62, monthly benefits can grow by as much as 8% per year, beginning at age 62 and continuing through age 69, for those willing to wait.
Put another way, taking benefits prior to reaching your full retirement age will result in a permanently reduced monthly payout of up to 30%. Meanwhile, claiming benefits after your full retirement age can increase your Social Security check by as much as 32% per month, depending on your birth year.
Here's the average Social Security retirement benefit for every year since 1950
Now that you have a better understanding of how Social Security benefits are calculated, let's dig into the meat and potatoes of how benefits have grown since the mid-20th century.
Year | Average Monthly Benefit | Year | Average Monthly Benefit | Year | Average Monthly Benefit |
---|---|---|---|---|---|
1950 | $43.86 | 1975 | $207.18 | 2000 | $844.48 |
1951 | $42.14 | 1976 | $224.86 | 2001 | $874.44 |
1952 | $49.25 | 1977 | $243.00 | 2002 | $895.00 |
1953 | $51.10 | 1978 | $263.20 | 2003 | $922.08 |
1954 | $59.14 | 1979 | $294.30 | 2004 | $954.89 |
1955 | $61.90 | 1980 | $341.40 | 2005 | $1,002.00 |
1956 | $63.09 | 1981 | $385.97 | 2006 | $1,044.40 |
1957 | $64.58 | 1982 | $419.30 | 2007 | $1,078.60 |
1958 | $66.35 | 1983 | $440.77 | 2008 | $1,152.90 |
1959 | $72.78 | 1984 | $460.57 | 2009 | $1,164.30 |
1960 | $74.04 | 1985 | $478.62 | 2010 | $1,175.50 |
1961 | $75.65 | 1986 | $488.44 | 2011 | $1,228.57 |
1962 | $76.19 | 1987 | $512.65 | 2012 | $1,261.61 |
1963 | $76.88 | 1988 | $536.77 | 2013 | $1,293.83 |
1964 | $77.57 | 1989 | $566.85 | 2014 | $1,328.58 |
1965 | $83.92 | 1990 | $602.56 | 2015 | $1,341.77 |
1966 | $84.35 | 1991 | $629.32 | 2016 | $1,360.13 |
1967 | $85.37 | 1992 | $652.64 | 2017 | $1,404.15 |
1968 | $98.86 | 1993 | $674.06 | 2018 | $1,461.31 |
1969 | $100.40 | 1994 | $697.34 | 2019 | $1,502.85 |
1970 | $118.10 | 1995 | $719.80 | 2020 | $1,544.15 |
1971 | $132.17 | 1996 | $744.96 | 2021 | $1,658.03 |
1972 | $162.35 | 1997 | $774.84 | 2022 | $1,825.14 |
1973 | $166.42 | 1998 | $779.69 | 2023 | $1,907.00 (est.) |
1974 | $188.21 | 1999 | $804.30 | 2024 | To be determined |
Take note that the average monthly retired worker benefits are as of December for each listed year. Further, as of 1975, average retired worker benefits factor in annual cost-of-living adjustments (COLAs) in the upcoming year. COLA is the tool that accounts for inflation and attempts to ensure that beneficiaries don't lose purchasing power.
For instance, the average payout of $1,825.14 in December 2022 factors in the 8.7% COLA that was passed along this year. The $1,658.03 average benefit in December 2021 accounts for the 5.9% COLA passed on in 2022, and so on.
As you can see, we've come a long way from 1950, when the average retired worker was taking home $43.86 per month.
Probably the biggest takeaway from looking at 74 years of average Social Security retired worker benefits is the importance annual cost-of-living adjustments have played.
Prior to 1975, COLAs were completely arbitrary and passed along by special sessions of Congress. Between the first monthly Social Security benefit being doled out in January 1940 and October 1950, there wasn't a single COLA. Between October 1950 and early 1968, only five cost-of-living adjustments were approved by Congress. This is why average Social Security checks for retired workers grew very slowly in the 1950s and 1960s.
Since 1975, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) has been the program's inflationary measure used to determine annual COLAs. There have only been three years since 1975, when deflation occurred, and the value of the CPI-W didn't rise from one year to the next -- the average CPI-W reading from the third quarter (July through September) is what determines annual COLAs.
Since 1975, annual cost-of-living adjustments have increased by an annual average of 4.73%.
Retirees continue to receive the short end of the stick
While the growth of average Social Security retired worker benefits over the past 74 years looks great on paper, a deeper dive reveals that retirees have been getting the short end of the stick for more than two decades.
In May, The Senior Citizens League (TSCL), a nonpartisan senior advocacy group, released a report that examined aggregate COLAs between January 2000 and February 2023 and compared that figure to cumulative price increases for a basket of commonly purchased goods and services by retirees. TSCL noted that while Social Security benefits have increased by 78% since this century began, retirees have faced inflation of 141.4% on the goods and services they've regularly bought over the same timeline. In other words, the purchasing power of a Social Security dollar has plunged by 36% since January 2000.
Interestingly enough, the culprit for this mess is the CPI-W. Although it's a broad-based inflationary index, its full name demonstrates why it's failing retired workers.
The CPI-W is an index focused on the spending habits of "urban wage earners and clerical workers." These are typically working-age Americans who aren't currently receiving a Social Security benefit. By comparison, 86% of Social Security beneficiaries are age 62 and over.
Whereas seniors spend a higher percentage of their budget on medical care expenses and shelter costs than the average worker, urban wage earners and clerical workers will dole out more for apparel, education, transportation, and other factors that simply aren't as important to retired workers. Without adequate weighting in the COLA calculation for the expenses that matter most, retirees will continue to lose ground.