But not everyone takes home the same amount in Social Security benefits. In 24 states, the average retiree receives a monthly Social Security check worth less than $1,400. Three states have an average Social Security retirement benefit above $1,500, but none surpass $1,600.
Consistently Earn a High Salary
In recent years, you need to earn a six-figure salary to get a top Social Security payment. The maximum wage taxable by Social Security is $147,000 in 2022. However, the exact amount changes each year and has increased over time. It was $137,700 in 2020 and $106,800 in 2010.
Social Security benefits are based on your lifetime earnings. Your actual earnings are adjusted or “indexed” to account for changes in average wages since the year the earnings were received. Then Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most.
Imagine that an individual who attained full retirement age at 67 had enough years of coverage to qualify for the full minimum Social Security benefit of $897. If they filed at 62, there would be a 30% reduction to benefits. This means that for 2020, the minimum Social Security benefit at 62 is $628.
Most Americans contribute 6.2% of their earnings to the Social Security system, and employers pay a matching amount. Those who are self-employed pay 12.4% of their income into Social Security. Workers who have sufficiently paid into the system can collect retirement benefits beginning at age 62 or older.
Workers who earn $60,000 per year pay payroll taxes on all of their income because the wage base limit on Social Security taxes is almost twice that amount. Therefore, you'll pay 6.2% of your salary, or $3,720.
The point is that if you earned $120,000 per year for the past 35 years, thanks to the annual maximum taxable wage limits, the maximum Social Security benefit you could get at full retirement age is $2,687.
Consider the Average Social Security Payment
The average Social Security benefit is $1,657 per month in January 2022. The maximum possible Social Security benefit for someone who retires at full retirement age is $3,345 in 2022.
Social Security benefits can have an enormous impact on your retirement. Fortunately, you may be eligible for Social Security even if you haven't worked long enough to qualify for your own benefits. By taking advantage of any of these types of benefits, you can boost your retirement income with little to no effort.
The question is, what can the typical retired worker expect to receive from Social Security at age 62? According to payout statistics from the Social Security Administration in June 2020, the average Social Security benefit at age 62 is $1,130.16 a month, or $13,561.92 a year.
If you start collecting your benefits at age 65 you could receive approximately $33,773 per year or $2,814 per month. This is 44.7% of your final year's income of $75,629. This is only an estimate. Actual benefits depend on work history and the complete compensation rules used by Social Security.
Those who make $40,000 pay taxes on all of their income into the Social Security system. It takes more than three times that amount to max out your Social Security payroll taxes. The current tax rate is 6.2%, so you can expect to see $2,480 go directly from your paycheck toward Social Security.
When you reach your full retirement age, you can work and earn as much as you want and still get your full Social Security benefit payment. If you're younger than full retirement age and if your earnings exceed certain dollar amounts, some of your benefit payments during the year will be withheld.
The first is that a Social Security benefit is an earned benefit. ... To even be eligible for retirement benefits, you generally need 10 years (40 quarters) of gainful employment. In 2017, you need to earn at least $1,300 in a quarter for it to count as a credit.
You can collect Social Security retirement benefits at age 62 and still work. If you earn over a certain amount, however, your benefits will be temporarily reduced until you reach full retirement age.
Can I collect Social Security survivor benefits when my ex-spouse dies? You qualify for survivor benefits on the work record of a late ex-husband or ex-wife if: The marriage lasted at least 10 years.
If you earned $20,000 for half a career, then your average monthly earnings will be $833. In this case, your Social Security payment will be a full 90% of that amount, or almost $750 per month, if you retire at full retirement age.
The number of credits you need to get retirement benefits depends on when you were born. If you were born in 1929 or later, you need 40 credits (usually, this is 10 years of work). If you stop working before you have enough credits to qualify for benefits, the credits will remain on your Social Security record.
You can begin collecting your Social Security benefits as early as age 62, but you'll get smaller monthly payments for the rest of your life if you do. Even so, claiming benefits early can be a sensible choice for people in certain circumstances.
The first full special minimum PIA in 1973 was $170 per month. Beginning in 1979, its value has increased with price growth and is $886 per month in 2020. The number of beneficiaries receiving the special minimum PIA has declined from about 200,000 in the early 1990s to about 32,100 in 2019.
Some of you have to pay federal income taxes on your Social Security benefits. between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits. ... more than $34,000, up to 85 percent of your benefits may be taxable.
Here's what the math looks like: 90% of the first $885 = 0.9 x $885 = $796.50. 32% of earnings between $885 and $5,336 = 0.32 x $4,451 = $1,424.32.
For example, the AARP calculator estimates that a person born on Jan. 1, 1960, who has averaged a $50,000 annual income would get a monthly benefit of $1,338 if they file for Social Security at 62, $1,911 at full retirement age (in this case, 67), or $2,370 at 70.
If you're making $100,000 per year right now, congratulations! You're roughly tripling the Social Security Administration's estimated 2019 median annual earnings of $34,248, and doubling the average individual yearly earnings of $51,916 — a figure that's skewed higher by a handful of super-earners.