The average retiree falls $2,538 less than the maximum Social Security benefit. Here’s Why | Smart Change: Personal Finance

(Christy Bieber)

In 2022, the maximum monthly Social Security benefit is $4,194. This would provide a generous $50,328 in retirement income to those who receive it.

However, most people will not come close to maximizing their benefits. In fact, the average monthly retirement check is only $1,657, meaning the average senior gets $2,538 per month less than the largest possible check. So the big questions are, why are so many people falling so short and getting close to the maximum benefit?

Image source: Getty Images.

Here’s Why Most Seniors Don’t Get Near Their Social Security Checks

The average Social Security benefit is much smaller than the maximum benefit because retirement income is based on the average wage over the course of your career.

Look, Social Security benefits are designed to replace about 40% of pre-retirement income for most workers and less for the richest workers, because the benefit formula is progressive. The Social Security Administration:

  • Collects data on wages earned per year.
  • Adjust wages for inflation.
  • Applies a formula that gives retirees benefits equal to a percentage of their average wage over their 35 highest-earning years.

This is how the standard benefit is calculated. Then this standard benefit is adjusted based on how old a person is when they first get Social Security checks.

However, there is a maximum wage that counts each year when your Social Security income record is created. If you earn above the maximum wage, then Social Security taxes are not deducted from each additional dollar of income and it does not count when determining your average wage or benefits. The maximum average wage, called the wage base cap, exists to prevent people who make millions a year from getting huge Social Security benefits.

To receive the maximum benefit of $4,194, a retiree would have to earn an amount equal to or greater than the wage base limit for 35 years. Because the age at which benefits are claimed also affects the amount of the checks, they should wait to claim Social Security until age 70, when benefits are at their maximum, and there is no further benefit to cash out. set. That’s a full eight years after Social Security benefits first became available at age 62.

It is not easy to earn an amount equal to the wage base limit, especially if you have to do it every year for a period of 35 years. The exact amount of this limit is adjusted each year to account for inflation, but the amount needed is $147,000 in 2022 and is the inflation-adjusted equivalent of that amount each year. Since most people don’t earn anywhere near that much money, and since most people claim Social Security well before age 70, it’s easy to see why the average benefit is so much lower than the maximum benefit. .

What can you do if you do not receive the maximum benefit?

Since there’s a good chance you’ll be getting far less than $50,328 in retirement money from the Social Security Administration, be prepared for the reality of how far your benefits will go. You can find out by going to, logging into your account and estimating the age at which you will first start claiming benefits.

Since you may be surprised to find out how low the typical benefit amount is, it’s important to take this step early so you can prepare for smaller-than-expected Social Security benefits. If you have a realistic idea of ​​how much support Social Security provides, you can ensure that you set savings goals that will give you the security you deserve as a retiree.

The $18,984 Social Security Bonus Most Retirees Completely Overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” can give your retirement income a boost. For example, one simple trick can save you as much as $18,984 more… a year! Once you know how to maximize your Social Security benefits, we think you can retire with confidence with the peace of mind we all strive for. Click here to learn how to learn more about these strategies.

The Motley Fool has a disclosure policy.

Leave a Comment