January 21, 2022

Social Security Benefits: How Much Will Yours Be?

How Much Are Your Social Security Benefits in Dollars? That’s an important question about retirement planning for most people.


It is also the target of simple financial curiosity. And the answer has major practical consequences. Social Security plays a big role in determining your total, total annual income after retirement.

According to JP Morgan Asset Management, Social Security typically provides 12% of your early retirement income if that amount was $300,000. But Social Security will eventually replace 51% of your income if you made $60,000 before retirement.

Social Security will typically replace 38% of your income if your pre-retirement income was $100,000.

Social Security Benefits: How Big Will Yours Be?

So knowing how big your Social Security benefits will be in dollars has a big impact on your wallet. The gap between your Social Security benefits and the annual income you need in retirement is an amount most people have to pay for themselves from their retirement savings.

That means knowing how much your Social Security benefits will be is vital to finding out how much you need in retirement savings.

Do you not want to know how your benefits compare to those of others?

Average US Social Security Benefit

Let’s start with these benchmarks from December 31st to see where you stand:

  • Average US advantage: The average monthly benefit for a retired employee is $1,623. That’s $19,476 per year.
  • Full Retirement Age (FRA): The maximum starting benefit for someone who starts collecting at what the Social Security Administration calls full retirement age, if FRA is 67, is $3,568. That’s $42,816 a year.
  • Maximum monthly benefit: The maximum starting advantage for someone who starts collecting at age 70, the age at which further delay does not increase the dollar amount is $4,194. That is $50,328 annually.

Your Social Security benefits depend on your income in each of your 35 highest income years. It also depends on your age when you start collecting. For each year that you defer your benefits after your FRA until age 70, you will receive an 8% increase in your benefits.

Benefits from 65 years

Since people’s benefits vary based on income in their highest income years and starting age, no simple chart can show you the starting benefits for everyone.

But we can run the numbers and show you a starter allowance for you if your age and income meet certain criteria.

For example, let’s say you are 60 years old. You plan to retire at age 65. After you receive a 1% annual pay increase, your salary at retirement will be $80,000. Let’s also assume that your career pay pattern is typical. Also imagine that inflation will be 2.9% per year. In that scenario, your Social Security benefits as a single start at $1,744 per month, or $20,929 per year, according to the bankrate.com.

If your retirement pay is $100,000, your benefits start at $2,026 each month, which equals $24,315 per year.

And if your retirement pay will be $125,000, your monthly benefits will be $2,407 at the beginning for $28,889 per year.

Here’s a summary of those starter benefits:

  • Final Pay of $80,000: benefit of $1,744 per month, $20,929 per year.
  • Final Salary of $100,000: benefit of $2,026 per month, $24,315 per year.
  • Final Pay of $125,000: benefit of $2,407 per month, $28,889 per year.
  • Final Pay of $200,000: benefit of $2,764 per month, $33,173 per year.

Social Security benefits are higher for married couples.

Benefit of delaying the start of benefits

Let’s review that situation now. Postpone retirement by five years. That’s the only change in assumptions. But it increases your starting Social Security benefits.

Suppose you are 65 years old and plan to retire at age 70. Your start-up benefits are much higher.

And that’s true, even if it took you another five years to reach the same final pay levels of $80,000, $100.00, and $125,000. That longer time frame means your wages were lower from year to year until you reach the same final income. However, your start-up payment is higher.

For example, the government encourages people to postpone starting their benefits. This is the starting benefit for each of those same final annual incomes, if you wait until age 70:

  • Final Pay of $80,000: benefit of $2,433 per month, $29,196 per year.
  • Final Salary of $100,000: benefit of $2,811 per month, $33,737 per year.
  • Final Pay of $125,000: benefit of $3,387 per month, $40,644 per year.
  • Final Pay of $200,000: benefit of $3,547 per month, $42,562 per year.

Those are significant increases. In those scenarios, delaying the start of your benefit by five years increases your starting benefit by approximately 40%, 39%, 41% and 28%, respectively.

Now you know how much your starting advantages will be if your circumstances match those scenarios.

Follow Paul Katzeff on Twitter at @IBD_PKatzeff for tips on retirement planning and active fund managers that consistently outperform the market.


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