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When planning for retirement, many people rely on the average Social Security amount as a benchmark for their future income. However, the average Social Security amount is actually quite meaningless when it comes to individual retirement planning. Here’s why.
First and foremost, the average Social Security amount is just that – an average. It’s a number that represents the median payout for all Social Security recipients, regardless of their individual circumstances. This means that it doesn’t take into account factors such as your earnings history, when you start taking benefits, or any other sources of retirement income you may have.
In reality, your Social Security benefits will be calculated based on your lifetime earnings, the age at which you begin taking benefits, and the current cost of living. This means that your benefits could be significantly higher or lower than the average depending on your unique situation.
Additionally, the average Social Security amount doesn’t factor in the fact that Social Security benefits are intended to replace only a portion of your pre-retirement income. For many people, Social Security benefits will only cover a fraction of their living expenses in retirement, making it crucial to have other sources of income such as a 401(k), IRA, or pension.
Furthermore, the average Social Security amount can be misleading because it doesn’t account for the fact that Social Security as a whole is facing financial challenges. The Social Security trust funds are projected to run out of money in 2034, which could result in benefit cuts if no action is taken to address the program’s funding shortfall. This means that future retirees may not receive the same level of benefits as current retirees, making it even more important to have additional sources of retirement income.
So, what does this mean for you? It means that you shouldn’t rely on the average Social Security amount as a reliable indicator of your future benefits. Instead, take the time to understand how your benefits will be calculated based on your individual earnings history and retirement timeline. Consider other sources of income and be mindful of the potential for changes to Social Security in the future.
Ultimately, the average Social Security amount is just a number – it’s your individual circumstances and planning that will determine your financial security in retirement. By understanding the limitations of the average amount and taking proactive steps to plan for your future, you can ensure that you have a comfortable and stable retirement.
Does the numbers change if your single. Because I have averaged around 40 K per year indexed.
I made at least twice as much money, or more, as in the demo, yet my yearly SS amount is only a couple thousand dollars higher. What's up with that?
Awesome video
Josh I have subscribed for the last month. Love your style. The information you deliver is invaluable. Thanks
Josh my ss benefit at 66 is 3200. If she takes spousal at 62, 35% of 3200 = $1120 + $3200 = $4320/ mo. Is that correct or is the amount means tested against other income (pension) ?
Another great video!
I like your style. Please don't change. Just be Josh
Josh, I really wish I understood the "bend points" more, even after googling it's not as simple as all the other calculations you do. I'm a numbers girl, so most of this is very easy to understand. But, when trying to do our own calcs, this is where I get hung up
Just fill out an excel spreadsheet using SS calculations based on one’s earnings End of story.
I'm pretty well rounded with finances and investing but one weakness has been regarding social security. I have learned so much from your channel and love your personality making the videos that much more interesting. I agree with your comment regarding needing multi-million dollar retirements, maybe it has to do with the broke and indebted lifestyle that individuals requires supporting. We plan on downsizing and relocating to 1 of 3 tax friendly states we enjoy. Our plan is to retire from the full time life at 60 and work in something low stress and very enjoyable for the next 5 years or so. This information has definitely made us more confident in our retirement making decisions. Thanks for sharing and look forward to future videos.
Awful that he says that 30K a year is not even average. Its low. I am 57 years old, and have NEVER made 30K a year…. EVER.
your pointer is too long
So is that 5 years of goose eggs you mentioned, a freebie, which is a good thing, right?
Exceptional video Josh. One of your best. The calculations are a great way to explain what is going on
Preach it Josh! And what household only has 1 income? In this day and age most households have 2 incomes.
I love your passion. Great video.
Josh, if SS is treated as an asset in a portfolio and behaves similar to a TIPS, or a bond, is there any logic to having bonds in the rest of a portfolio?
Thanks Josh good to know.
Anyone who sits down and thinks logically about how much money you need in retirement will realize that if your AIME is around the 4k mark, you'll be basically in the same financial situation with Social Security only than you were while working. On the other Hand, if your AIME was something like 10k, and you expect to maintain the same lifestyle you'd need to supplement Social security with other income (IRA, Pension, etc…) Since i'm such a tightwad and plan to be debt free by around 57, I'm projecting to have about triple the disposable income in retirement that I have now. I think I'm saving too much Lol…