Here’s the average Social Security benefit for retirees right now (and what they could be in 2030)

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Here’s the average Social Security benefit for retirees right now (and what they could be in 2030)

Social Security benefits will likely play an important role in your retirement income. After all, almost Nine out of 10 People 65 and older were receiving benefits as of June 30, 2023.

According to 2021 research from the Social Security Administration (SSA), these benefits account for about 30% of the income of people over 65.

Since Social Security can contribute significantly to your income, it’s helpful to know As you plan How your benefits will change over time.

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Average benefits now and in the future

the Estimated average monthly interest For all workers retiring in January 2024 it was $1,907. Using 2000-2024 estimates, the annual increase in the average monthly benefit for all retired worker beneficiaries was 3.53%. At this pace, interest could jump 23% to $2,348 by January 2030.

Although these aggregate numbers are informative, they should only serve as a rough guide. Your monthly benefits can vary greatly based on when you start collecting and how much you earned during your working years. If you’re looking for a more personalized estimate of your expected monthly benefits, use Social Security online Quick interest calculator.

How are interest calculated?

Your monthly Social Security benefit is calculated By applying a formula to your Average Indexed Monthly Earnings (AIME) to determine your Primary Insurance Amount (PIA). Indexing simply means that the government makes sure that your future benefits reflect the general rise in the standard of living during your working life. Your AIME takes your highest earnings over 35 years (or less if you worked under 35), indexes them to take into account wage growth, and then produces an average monthly figure.

This number is adjusted up or down depending on whether you retire before, after, or at retirement Normal Retirement Age (NRA)Which ranges from 65 to 67 depending on your year of birth. Once you start receiving benefits, they will change annually based on the cost of living adjustment (COLA), which reflects changes in the Consumer Price Index (CPI). This is how your interest keeps up with inflation.

for you Pia It is derived by combining three different parts of your AIME. In 2024, the PIA is the sum of:

  • 90% of your first $1,174 of AIME;

  • 32% of your AIME over $1,174 up to $7,078; And

  • 15% of your AIME over $7,078.

The percentages are set by law, but the “bend points” ($1,174 and $7,078) change each year based on the national average wage index.

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What matters is when you retire

If you choose to collect retirement benefits before you reach your NRA, you can do so as early as age 62, but your benefits will be reduced from your PIA, depending on how early you start. For example, starting your benefits at age 62 in 2024 would mean a 30% reduction in your PIA, compared to waiting until your NRA. Likewise, benefits will rise if you retire after your NRA, until age 69.

Benefits are adjusted for inflation

The COLA, which averages 2.6% from 2000 to 2024, is announced in October of each year and goes into effect in January of the following year. It reflects the year-on-year change in the Consumer Price Index for Urban Wage and Clerical Workers (CPI-W). For example, the 3.2% COLA that took effect in January 2024 was announced in October 2023 and is based on the increase in the Consumer Price Index between the third quarters of 2022 and 2023.

While Social Security benefits can provide a valuable addition to your retirement income, you’ll still need to build a nest egg to live comfortably. Find out how much you can expect from these payments, even as you build them into a comprehensive plan that paves the way for a rich life after work.

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This article provides information only and should not be construed as advice. They are provided without warranty of any kind.

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