The Most Important Retirement Chart You’ve Ever Seen | Smart Switch: Personal Finance

(James Brunley)

Will it or won’t it? That’s the question investors and workers of all ages are increasingly asking about payments from the US Social Security program these days. Will it be enough to fully supplement my retirement needs? In fact, given the talk about its sustainability, will the SSA be able to make the payments as promised?

The answer, of course, depends on how much you’ll need in retirement and how much you’re saving while you’re still working. However, at the very least, it’s good to have a rough idea now of what you can expect at that point.

To that end, here’s a visual breakdown of how many people receive how much each month from the nation’s Social Security Administration. The odds are good that you’ll find yourself somewhere around the middle of the average, for better or worse.

This is what the Social Security people charge

The average monthly Social Security payment for a retiree in 2022 is $1,657. But the fun thing about averages is that they can hide a lot of extreme data. Many people are receiving much, much less than that amount, and some lucky ducks are raising considerably more. Many personal factors go into determining your particular monthly payment, such as how long you worked, how much you earned, and how old you retire. So while that number is fine to start making a financial plan, it’s not a number you can afford to set in stone.

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The chart below really puts things into perspective. While the average monthly check is worth $1,657, about 20% of program participants will receive less than $1,000 per month, and there is a large group of people who take home around $1,000 per month. Half will get less than $1,600.

Data source: US Social Security Administration. Table by author.

And the SSA is not as fruitful for higher income earners as some people might hope. Only about 4% of Social Security beneficiaries receive more than $3,000 in monthly benefits. The remaining 45% of the crowd that collects more than the average $1,657 per month are still cashing checks for less than $3,000, even though that’s equal to the nation’s median annual earnings for a full-time worker, according to data from the Administration. of Social Security.

In a nutshell, assuming you earn average money, there is a 50% chance that your monthly salary Retirement Social Security benefit check could be as little as $1,000 (in today’s dollars) and no more than $2,000 per month. There’s only a 30% chance it will be bigger than that, since it takes consistent income (again, in today’s dollars) of around $6,000 per month or more to reach that pay level.

You can do more easily if you plan

That’s enough to survive, to be fair. However, for someone with plans to travel in retirement or looking to leave savings for their children, that limited level of income presents challenges. Most people will want more.

Image source: Getty Images.

The good news is that this “more” is certainly possible even while earning a modest salary in the meantime. The key is to consistently save something now, no matter how small the amount may seem. Even investing as little as $100 a month in a S&P 500 index fund and earning an average of 8% per year can grow to be worth around $135,000 over the course of 30 years. Invest that kind of savings in goods, stocks that pay dividends later in life it could supplement your monthly Social Security benefit by several hundred dollars, making the difference between a difficult retirement and a comfortable one.

And for the record, while earning more does increase the size of your Social Security check, the chart above also suggests that a law of diminishing returns is at play here. That is, while you don’t lose money by earning more, your Social Security advantage decreases the more you earn, and the extra advantage stops entirely once your earnings exceed this year’s limit of $147,000. Ergo, the closer you get to that mark, the more important it is to invest to grow on your own if you want to maintain your current standard of living.

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