Planning for retirement can be difficult, especially if you are unsure how much income you will have. Most Americans rely on Social Security for income during retirement, so predicting how much their monthly Social Security benefits will be is critical to their retirement planning. However, many people have no idea how much their Social Security payments will be. Moreover, they also have no idea how those payments are calculated.
If you need to know how much your monthly Social Security check will be, then keep reading! We will tell you the average amount you can expect to receive as well as how benefit amounts are calculated. We will even give you an easy way to estimate your benefit payments. Let’s get started!
Average Social Security Check Amount
The Social Security Administration (SSA) provides benefits to millions of Americans each month. These include both retirement benefits and disability benefits. The SSA also publishes data that shows the average Social Security payment amount for each type of benefit, and the data even breaks down the payments according to the type of beneficiary. Here are some details about average check amounts for both Social Security retirement benefits and Social Security disability benefits.
— Social Security Retirement Benefits
The average monthly benefit for a retired worker in March, 2023, is $1,833.23 (up from $1,665.18 in March, 2022). Remember that this is only the average amount, and this is what you can expect to receive if you make average wages. Some retirees receive more than this, while others receive much less. The maximum benefit amount that a retiree may receive in March, 2023 is $3,627 (up from $3,345 in March, 2022), and that amount includes delayed retirement credits for waiting past full retirement age to start your benefits.
Retirement benefits also include spousal benefits and survivor benefits. In March, 2023, the average monthly check for spousal benefits was $898.13, (up from $838.41 in March, 2022). For survivor benefits, the average payment in March, 2023, was $1488.88 (up from $1325.68 in March, 2022). You can quickly see that most people will need another source of income during retirement besides Social Security. It would be hard live solely on these amounts.
— Social Security Disability Benefits
Now that you know how much retirees can expect to receive from Social Security, let’s take a look at Social Security disability benefits. Overall, the average payments to disabled workers are slightly lower than payments to retirees. In March, 2023, the average monthly payment to a disabled worker on Social Security disability was $1,483.68 (up from $1,360.16 in March, 2022). Dependent children and spouses can also be eligible for disability payments in some situations. The average payment for a dependent child of a disabled worker in March, 2023, is $473.07 (up from $430.43 in March, 2022), and the average payment to the spouse of a disabled worker in March, 2023, is $405.91 (up from $375.98 in March, 2022). These low amounts make clear the importance of signing up for private disability insurance, in case you become unable to work.
How Social Security Benefits Are Calculated
Many people wonder, “How are Social Security benefits calculated?” You probably already know that you pay Social Security taxes during your working years—even on self-employment income. These taxes are placed into the Social Security trust funds and used to pay benefits to current beneficiaries. Social Security is considered a “pay as you go” system. This means that the taxes of today’s workers are paying the benefits of today’s beneficiaries. That sounds simple enough, but how does Social Security calculate the amount you receive each month upon retirement?
Your retirement benefit amount is based mostly upon your lifetime earnings during your working years. The more money you earn, the higher your Social Security payments will be. Here is a general overview of how the calculation works. First, Social Security uses your highest 35 years of earnings in the calculation. If you worked less than 35 years, then the calculation will include zero for the remaining years. Your yearly earnings are indexed to current values using an index table published by Social Security. For example, if you earned $100,000 in 2005, that value might be indexed to $110,000 in 2023 dollars. Once all your earnings are indexed to the current year, they will be averaged to arrive at your average indexed monthly earnings (AIME).
Once your AIME has been calculated, the SSA will then apply bend points to calculate your primary insurance amount. Here is how the bend points work in 2023. Your primary insurance amount will include 90% of the first $1,115 of your AIME plus 32% of your AIME between $1,115 and $6,721 plus 15% of your AIME above $6,721, up to the table maximum of $13,350, in 2023. This sum is your primary insurance amount, and that is the amount you will receive if you start your benefits upon reaching full retirement age.
Remember that your primary insurance amount will be adjusted if you start your benefits early or late. Starting your benefits early will reduce your monthly benefits, while waiting past FRA to begin your benefits will increase the monthly amount.
If you think this calculation sounds too complex, you’re not alone! Thankfully, Social Security has made it easy to estimate your benefits. Simply head over to the Social Security Administration’s website and register for a My Social Security account. Once you create your account, you can easily estimate your future benefits. In addition, you can also get easy access to your Social Security statement, view your earnings history, and even apply for benefits.
Full Retirement Age: How It Affects Your Benefit Amount
While you may become eligible for Social Security benefits as early as age 62, most people will not reach full retirement age until 67. Most people want to maximize their retirement income, so they want to ensure that their Social Security payments are as high as possible. There are several methods for maximizing your Social Security income, but retirement age is one of the biggest factors. Your retirement age can have a big impact on your Social Security payments—both positive and negative!
Starting your benefits before you reach full retirement age will have a negative impact on your benefit amount. Your benefits will be reduced by roughly 0.5% for each month you begin your benefits early. For example, if your full retirement age is 67 but you start your benefits at age 66, your benefit payment will be reduced by about 6%. For those who start payments at age 62, their benefit can be reduced by as much as 30%. You should also remember that early retirement will reduce your benefits for the rest of your life, so you could lose out on a lot of money by starting your benefits early.
On the other hand, delaying the time at which you start to collect Social Security will lead to a larger monthly payout. The specific monthly increase depends on your birth year, but you will see an approximate 0.5% increase for each month you delay the start of your benefits. Delayed retirement credits max out at age 70, so there is no need to wait past age 70 to start your benefits. Again, these increased payments will last for the rest of your life, so you could end up getting a much larger sum from Social Security—especially as the life expectancy in the United States continues to rise.
Social Security Cost Of Living Adjustments
Inflation has always been a concern, but it has become an extremely hot topic lately. For those who receive Social Security, it can become a challenge to make ends meet as the cost of goods rises. You might be wondering whether you will ever see an increase in your Social Security payments. Thankfully, the answer is yes! The Social Security Administration provides an annual cost-of-living adjustment to Social Security beneficiaries. The amount of the adjustment is tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) published by the Department of Labor. The COLA is calculated in December of each year, and any increase becomes effective in January of the following year.
January 2023 saw an increase in payments of 8.7%. Since inflation in 2022 was high, the cost-of-living adjustment was much higher than usual. This increase in payments can help Social Security beneficiaries continue to maintain a consistent standard of living. So, what happens if the CPI-W shows a decrease in the price of goods? In that case, there will be no adjustment to monthly benefit payments. Social Security benefits will never be reduced as a result of the cost-of-living adjustment.
How Medicare Payments Affect Your Social Security Check
You probably already know that you become eligible for Medicare benefits upon reaching age 65. But how does Medicare affect your Social Security check each month? Many people qualify for Medicare Part A coverage at no cost. However, there is always a monthly premium associated with Medicare Part B. When you sign up for Original Medicare (Part A and Part B), your monthly premium is typically deducted from your monthly Social Security check. The standard Part B premium in 2023 is $164.90 per month. This is the amount that most people pay, although that amount could be higher if your total income is high.
Some people decide to sign up for a Medicare Advantage plan through a private insurance company instead of using Original Medicare. Most of these plans also require the payment of a monthly premium. Instead of having the amount deducted from your Social Security check, you might pay the insurance company directly each month.
Regardless of the plan you choose or how your payments are made, you will need to account for Medicare premiums when planning for your retirement. While the Part B premium might not be extremely expensive, it is another expense that you will need to account for each month. If you have used the Social Security benefits estimator to get an idea of your monthly check amount, you will need to remember to subtract the Medicare premium from this amount.
Are Social Security Benefits Taxable?
So, are Social Security benefits taxable? Whether or not you pay income taxes on your benefit payments depends on your total income. Your Social Security payments can sometimes be considered taxable earnings, and you might owe taxes on them when you file your income tax returns for the year. Here is what you need to know.
First, you will need to calculate your total combined income. This includes the sum of your adjusted gross income, tax-exempt interest income, and half of your Social Security payments. This means that income from other sources, such as annuities or retirement accounts, can affect the taxability of your Social Security benefits. For an individual with a combined income of less than $25,000, no taxes will be due on the Social Security payments. For a combined income between $25,000 and $34,000, taxes will be due on half of the Social Security payments. Once your combined income passes $34,000, you will owe taxes on 85% of your Social Security payments. You will never owe taxes on the final 15% of your Social Security payments.
For married couples filing a joint return, the amounts are slightly different. No taxes will be due on Social Security payments when the couple’s combined income is less than $32,000. Taxes will be due on half the Social Security amounts for combined income between $32,000 and $44,000. Finally, a couple with a combined income totaling more than $44,000 will owe taxes on 85% of their Social Security payments.
How Much Are SSI Benefits?
Supplemental Security Income (SSI) benefits are available to low-income individuals who are older or unable to work due to a disability. These benefit payments are usually much lower than Social Security retirement benefits. However, eligibility for SSI payments does not require a work history or earnings history. In March, 2023, the maximum SSI payment to an eligible individual is $914 per month (up from $841 in March, 2022). That amount increases to $1,371 (up from $1,261 in March, 2022) if the individual also has an eligible spouse. You should also remember that these are the maximum amounts, and those amounts might be reduced based on other income sources. Eligibility for SSI requires a person to have little income and almost no resources.
Those who receive SSI payments usually qualify for many other low-income assistance programs. These programs may include housing assistance, food stamps, cell phone programs, Medicaid, and others. Participation in SSI will automatically qualify you for some of these programs without any additional documentation.
The Bottom Line
Social Security benefit amounts vary widely from one retiree to the next. The average amount in 2023 is around $1,800 per month, although payments can be as much as $3,600 in some cases. The amount you receive each month is based on your earnings history. The higher your earnings each year while working, the more you will get from Social Security during retirement. In addition to payments to retirees, your spouse might also qualify for spousal benefits—even without their own earnings record. Similarly, survivor benefits and disability benefits average about $1,300 per month, although many recipients earn less than this. The easiest way to determine how much you will get from Social Security is to use the benefits estimator tool at SSA.gov.
Frequently Asked Questions
How do you know how much you will get in Social Security?
Are you wondering “how much Social Security will I get?” There are a couple of ways that you can determine how much you will get from Social Security. First, you can calculate your benefits on your own. You will need access to your lifetime earnings history to do this. Start by calculating your average indexed monthly earnings, applying the Social Security bend points, and adjusting the primary insurance amount for your retirement age. That might sound complicated, but there is a much easier way! Simply create a My Social Security account at SSA.gov. The Social Security Administration has a benefit estimator tool that will allow you to easily estimate the amount of your benefit payments.
What is the maximum amount you can make and still get Social Security?
There is no limit to how much you can make and still get Social Security, as long as you are at full retirement age. Your benefits might be reduced before you reach full retirement age if you earn more than the limit. In 2023, the earnings limit is $21,240 (up from $19,560 in 2022). For every $2 you earn above the limit, your Social Security benefits will be reduced by $1. In the year in which you reach full retirement age, the limit increases to $56,520 (up from $51,960 in 2022). During the months prior to your birthday in that year, benefits are reduced by $1 for every $3 you earn above the limit. Once you reach full retirement age, your benefits will no longer be reduced regardless of how much you earn.
What is the maximum amount of a Social Security check?
The maximum amount of a Social Security check in 2023 is $4,555. To get this amount, you would need to earn at least the Social Security earnings limit for at least 35 years. In addition, you would need to wait until age 70 to start your benefits. Most people receive much less than this from Social Security each month. The average payment to a retiree is around $1,833 per month. You can quickly see that most people receive far less than the maximum payment.
How much will I make on Social Security at age 62?
You might be wondering, “How much will I get in Social Security at age 62?” The amount you might receive at age 62 depends on your lifetime earnings record. The more you earn while working, the more you will receive from Social Security. However, the maximum benefit you can receive in 2023 if you retire at 62, is $2,572. Use our Social Security Break Even Calculator to help towards making a knowledgeable decision whether to retire early or not.