How much will I make in retirement? That's a big question for many people, especially as they get close to leaving the workforce. Of course, the answer will vary greatly by individual. Some have pension plans, while others don't. Some amass bigger retirement accounts than others.
Nearly every American can count on Social Security as a key source of retirement income. Again, the amount of their benefits will vary. How old you are when you begin collecting benefits makes a big difference in how much you'll receive. For anyone born in 1960 or later, the full retirement age (FRA) is 67. What's the average Social Security retirement benefit for age 67?
Image source: Getty Images.
How is the Social Security benefit amount calculated?
Let's first look at how the Social Security Administration (SSA) calculates retirement benefits. The most important variable in this benefits calculation is an individual's earnings history.
SSA first adjusts a worker's earnings to account for the change in overall wages that occurred during his or her career. The agency then selects the 35 years when the worker had the highest indexed earnings to calculate an average indexed monthly earnings (AIME) amount. If the person didn't have 35 eligible years of earnings history, SSA uses all of the years to determine the AIME.
Next, the agency uses the worker's AIME to calculate his or her primary insurance amount (PIA). The math behind the PIA formula is somewhat involved, so we won't delve into the details. The most important thing to know about the PIA is that it reflects the benefit a person would receive if he or she chooses to begin collecting retirement benefits at his or her FRA.
This is where the individual's age for receiving Social Security benefits looms large. SSA will reduce benefits for anyone who collects retirement benefits before reaching his or her FRA. However, benefits will also be increased if a person waits until age 70.
The average Social Security benefit at age 67
Based on the latest data from SSA, the average Social Security benefit for retired workers at age 67 is $1,844.83. The average differs by sex, though. Men at age 67 received an average monthly benefit of $2,054.54, while the average for women was $1,637.87.
It's important to note that these numbers were current as of December 2022. SSA hasn't yet released its annual statistical supplement with more recent data. The average Social Security retirement benefit at age 67 is almost certainly higher now as a result of the annual 8.7% cost-of-living adjustment (COLA) received in 2023. It's likely that the average will continue to rise in future years as well.
Keep in mind, too, some Americans who began collecting Social Security retirement benefits at age 67 in 2022 would have received a bump to the amount they received. Why? The FRA for anyone born in 1955 (the birth year for turning 67 in 2022) is 66 and two months. Therefore, a person born in 1955 who waited until age 67 and two months to collect benefits in 2022 would have received an additional 8% for holding off one year.
Ways to boost your Social Security benefits
Does the average Social Security retirement benefit of $1,844.83 sound too low for you? There are ways to boost your benefits, especially if you haven't begun collecting them yet.
The easiest alternative to increase how much you receive from SSA is to wait to claim your retirement benefits. Don't begin collecting Social Security before your FRA. Even better, postpone receiving them until you reach age 70.
Another option is to earn more money. That's easier said than done, of course. However, if you have an opportunity to move into a higher-paying position, it will likely increase your Social Security retirement benefit to some extent.
What if you've already started receiving Social Security benefits? It's possible that going back to work will increase the amount you receive from SSA. Remember, the agency uses the 35 years where you earned the most. If you can make more money by going back to work than you made earlier in your career, it just might result in boosting your retirement benefit.
