For many older Americans, Social Security plays a huge role in their retirement finances. And without those monthly benefits, many seniors would no doubt struggle to make ends meet.
You may be wondering how your monthly Social Security benefit compares to the benefits your retired peers are getting. There's data that can answer your question -- and steps you can take to improve your financial picture if your Social Security is falling short.
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How Social Security calculates benefits
There's a specific formula Social Security uses to calculate benefits. It takes your 35 highest-paid years of earnings and indexes them for inflation to determine what monthly benefit you're eligible for.
From there, the amount of money you receive each month depends on when you sign up for Social Security. If you file for Social Security at full retirement age (which is 67 for people born in 1960 or later), you'll get your complete monthly benefit without a reduction.
However, you can claim Social Security as early as age 62. And for each month you sign up ahead of full retirement age, your monthly benefits face a reduction.
On the flipside, if you don't need your monthly benefit starting at full retirement age, you can always delay your Social Security claim. Each year you hold off boosts your monthly payments by 8%, up until age 70.
What the average Social Security benefit for retirees looks like today
Each month, the Social Security Administration releases a monthly snapshot of what it's paying in benefits. And as of August, the average monthly benefit among retired workers was $2,008.31.
It's important to make this distinction, because Social Security actually pays different types of benefits, including:
- Spousal benefits
- Survivor benefits
- Disability benefits
Now if your monthly Social Security benefit is lower than the average, you may be having a hard time keeping up with your bills. But even if you're getting more Social Security than the typical retiree, you might still be struggling with your expenses. And that's a situation worth getting ahead of.
How to boost your retirement income
Unless you have a lot of savings to supplement your monthly Social Security checks, you may need to take steps to improve your financial picture. To that end, you may have more options than you think.
One, of course, is to go back to work. But you don't have to do so in the traditional sense.
The gig economy is loaded with opportunities to work flexibly while earning a decent income. It pays to think about the things you enjoy doing and see if any of them can become an income source. If not, you can always do things like drive for a ride-hailing service or house-sit when it's convenient for you.
Another option may be to downsize out of your home if it's possible to find less expensive housing. That could free up a pile of cash you can use to not only cover bills, but invest. And if you don't want to downsize just yet, you can consider renting out a portion of your home for income instead.
Whether the Social Security benefit you get in retirement is greater or less than the average, it's important to assess your finances and take steps to improve them if you're stressed about money. You deserve to enjoy your senior years to the fullest. And to do that, you may need to set yourself up with income outside of Social Security if you don't have much already.
