21 Dec 2015

Here’s How Much The Average American Gets From Social Security -- How Do You Compare?

Of course, not every American receives Social Security. But for those who do, the program provides a significant portion of one's overall income. In fact, according to government data, Social Security accounts for a whopping 39% of retirement income for the average American.
If you just want one number to see how much the average American receives from Social Security, the answer is $1,225 per month -- or roughly $14,700 per year. But as you know, the story isn't quite as simple as that.
Digging deeperBelieve it or not, there are 11 different situations in which someone can receive Social Security benefits. They range from being a retired worker -- the most common scenario, under which almost 40 million Americans collect payments, to being the parent of a deceased worker -- the least common. Only 1,000 recipients fall within that category.
Here's a breakdown of the most common situations in which someone receives Social Security benefits.


Most of you reading this will probably be qualifying as a "retired worker," but there's a significant portion that could qualify under some of the less-common situations. Figure out which category you belong to, and compare it to the average annual -- and monthly --  Social Security benefit.


While $16,000 per year might not seem like enough to live on in your golden years, it certainly isn't chump change either. It provides a huge part of many retirees' income. In fact, following the 4% rule, you'd need a nest egg worth at least $400,000 to safely withdraw $16,000 per year.
How your Social Security is determinedWhile I can't go through how 11 different types of payout situations are determined, I can tackle that of the retired worker.
The amount of money you receive upon retirement is based largely on how much you earned during your working years. Specifically, it functions like this for those who reached age 62 in 2015, with different amounts applying for those who first become eligible for Social Security in different years:
1. Take the inflation-adjusted average of your 35 highest-earning years.
2. You receive a 90% credit for the first $9,912 of your average from step one -- or roughly $8,900 per year.
3. You receive a 32% credit for anything from step one between $9,912 and $59,760 -- or up to roughly an additional $15,950 per year.
4. Anything above $59,760 from step one, and you get a 15% credit.
Things get even more complicated beyond that, as you can choose to start receiving Social Security benefits from anywhere to 62 years of age to 70 -- with 66 currently being the age of "full benefits." The earlier you take your benefits, the less you get -- the later, and the more you get.
Recently, our analysts have debated the pros and cons of taking Social Security early, at full retirement age, and as late as 70. In the end, it's a highly personal choice, with no one-size-fits-all answer. Be sure to fully investigate all of your options before filing.
And for younger readers, remember that the more you can save -- and invest -- right now, the less you'll have to count on the government securing your retirement decades from now.

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