This Is the Most Money People Can Get from Social Security (Plus, How Much the Average American Actually Gets)
The coming years are pivotal for Social Security. The program is well on its way to burning through assets and taking the retirement nest eggs of countless Americans down with it. Congress has been lackadaisical about finding a solution, which is unfortunate for those who rely on monthly Social Security payouts to live. 2018 was the first year in a while that monthly benefits increased, but did it really make a difference? And how much can you expect to get from Social Security this year?
To answer that question, we must first consider the program’s current state and how that affects your overall contributions and your monthly Social Security earnings in 2018 (page 4). We’ll also discuss what you can do to fix your benefits if the payouts aren’t quite what you expected (page 7) and whether your lifetime of contributions will even be worth it by the time you retire.
Social Security is in the red in 2018
- The system is starting to pay out more than it takes in
More people are paying into Social Security these days, but the number of people taking from it is also higher than ever. Social Security had to dip into the trust fund to pay for the program in 2018, reports say. It doesn’t take a business major to conclude trouble is near for programs who can’t turn a profit — or at the very least break even. The Social Security system is struggling to make up the difference (we’ll discuss why that is next) and Congress has yet to devise a solution to the problem.
Next: The situation affecting your monthly benefits most
The number of Social Security enrollees is skyrocketing
- The number of people over 65 in the U.S. will double by 2035.
Social Security is about to face an influx of people 65 and over ready to withdraw from Social Security. The number of payouts will double by 2035, though other reports from the Census Bureau said it could take until 2050 for such a burden to occur. Either way, America is getting older too fast and the program can’t keep up. Heck, 10,000 baby boomers retire each day. It’s up to other generations to pick up the tab and let Social Security live to see another day.
Next: Does what you’re paying in equal what you get in return?
Here’s how much you’re paying in, by generation
- Each employee (and employer) pays 2% of their paycheck.
Workers paid $836 billion into Social Security in 2016 alone. But the numbers break down a little differently by generation, meaning some will be paying and getting more than others. A 2015 study by the Urban Institute attempted to qualify the scenario. They estimated what the average American woman earning an average annual wage of $47,800 would pay into Social Security and receive back if she retired at age 65.
- Baby Boomers: A 65-year old woman retiring in 2015 would have paid $272,000 into Social Security and would receive $322,000 in benefits.
- Generation X: A single Gen X woman who retires in 2035 at age 65 can expect to pay $344,000 in Social Security tax and get $408,000 in benefits.
- Millennials: A 30-year-old millennial woman in 2015 can expect to pay $407,000 in Social Security tax and get $499,000 in benefits.
When it comes to benefits, Millennials have the most to lose. This group will be footing 75% of the bill by 2025, yet the oldest millennials won’t start collecting their own benefits for another 30 years. This means future retirees might receive a smaller percentage of the benefits than what retirees receive currently.
Next: This amount is the best-case scenario for monthly benefits
The maximum Social Security payout
- The most you can get from Social Security in 2018 is $2,788 a month
Regardless of how the future generations fair, current retirees are still in a good spot. A little wheeling and dealing might earn you a higher paycheck, as Social Security benefits are calculated based on your highest 35 years of earnings and the age at which you decide to retire. But even if you do play your cards exactly right, the most you can get from Social Security each month is $2,788 if you retire at full retirement age. That’s up $101 from 2017’s monthly limit.
Next: Here’s what most Americans will earn
The estimated average Social Security payout
- The average Social Security payout is $1,404 per month for all retired workers
The average monthly benefit for 2018 paints a more realistic picture of Social Security benefits. Retired workers can expect to earn somewhere around $1,404 per month from Social Security, up from $1,360 per month in 2017. That number is less for all disabled workers, at just $1,197.
Social Security recipients got a 2.0% cost-of-living adjustment (COLA) in 2018, the biggest increase since 2012. It won’t be enough to keep pace with the rising costs of, well, everything, but it’s better than the 0.3% increase in 2017 and the big ol’ goose egg beneficiaries got in 2016.
Next: But don’t forget about those taxes
What you can expect to pay in taxes
- Social Security is subject to federal, state, and possibly additional payroll taxes
Much of your social security income is subject to taxes, so it’d be wise for current and future enrollees to consider how these taxes will affect your overall earnings. Up to 85% of your combined income is subject to federal taxes, while 13 states tax Social Security income, ranging anywhere from 1% to 8.5%.
As we mentioned, the future of the Social Security program is a dim one. To prolong its life expectancy, Congress is also debating an increase in payroll taxes (more than the current 6.2%) that would ensure future retirees receive the same level of benefits current retirees get.
Next: Ways to boost your monthly payout
How to get a bigger Social Security check
- Maximize your earnings years, delay retirement, and check for reporting errors to increase benefits.
If the average monthly benefit number and its corresponding taxes have you feeling blue, there are ways you can maximize your benefits for a higher payout. This includes delaying benefits as long as possible to capitalize on your highest earning years and being strategic about working (even part-time) during retirement. Retirees on a budget can also consider moving to an area of the country with a lower cost of living in a state that doesn’t tax Social Security, among other things.
Next: This is how much you can expect in future benefits
Is all this for nothing?
- Social Security could run out of money by 2034
Even as the current workforce endures potentially higher tax rates on their paycheck to fund the current bought of retirees, it’s quite likely they won’t see the same favor returned down the line. Experts suggest beneficiaries should enjoy their “high” payouts now, as those aged 35-45 should plan on a 25% decrease in benefits by retirement age. They predict younger generations to fair worse, using terms like “unlikely” and “never” to describe Social Security expectations.
Follow Lauren on Twitter @la_hamer.
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