Here's the Average Social Security Benefit for Retirees Right Now (and What It Could Be in 2030)
Social Security is a key source of retirement income. In fact, research from the Social Security Administration found that benefits were the largest source of income for 40% of retired workers in 2015. Similarly, a survey from MassMutual found that 42% of workers nearing retirement in 2023 expect benefits to be their largest source of income when they retire.
In that context, understanding how much income Social Security might provide is a critical part of the retirement planning process. Generally speaking, benefits replace about 40% of pre-retirement earnings, but examining trends in the average Social Security payout can also be useful.
Read on to see the average Social Security benefit right now, how the average payout has trended since 2000, and what the average benefit might be in 2030.
The average Social Security benefit for retired workers in November 2023
The Social Security Administration publishes a monthly snapshot detailing payment information to various groups of beneficiaries. The most recent snapshot shows that 50 million retired workers received a Social Security benefit in November 2023, and the average payout was $1,844.76. That represents a 126% increase from November 2000, when the average payout was $815.62.
The chart below shows the average retired-worker benefit in November of each year dating back to 2000.
Year | Average Retired-Worker Benefit |
|---|---|
2000 | $815.62 |
2001 | $851.91 |
2002 | $882.19 |
2003 | $902.62 |
2004 | $929.43 |
2005 | $962.12 |
2006 | $1,010.57 |
2007 | $1,053.74 |
2008 | $1,089.28 |
2009 | $1,163.55 |
2010 | $1,174.74 |
2011 | $1,185.33 |
2012 | $1,239.36 |
2013 | $1,273.92 |
2014 | $1,305.58 |
2015 | $1,340.48 |
2016 | $1,354.78 |
2017 | $1,375.29 |
2018 | $1,420.10 |
2019 | $1,477.97 |
2020 | $1,522.70 |
2021 | $1,563.82 |
2022 | $1,677.52 |
2023 | $1,844.76 |
Data source: The Social Security Administration.
After examining the chart above, readers may wonder: Why did the average Social Security benefit for retired workers increase 126% (or 3.6% annually) over the last 23 years? And how might the payout change in the future?
Why the average Social Security benefit for retired workers has increased over time
There are two primary reasons the average Social Security retired-worker benefit has increased over time. First, the initial payout is impacted by changes in general wage levels, as measured by the average wage index (AWI). Second, subsequent payments are adjusted annually based on changes in inflation, as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
Generally speaking, the AWI and the CPI-W increase from one year to the next, so the average Social Security payout also increases. Here's a more detailed description on how the AWI and CPI-W impact retired-worker benefits:
The average wage index is used to calculate the average indexed monthly earnings (AIME) amount for each retired worker. Specifically, the AIME is determined by (1) indexing income from the 35 highest-paid years of work to the AWI and (2) converting that figure to a monthly average. Indexing income to the AWI ensures that benefits reflect living standard increases that occur during a worker's lifetime. Once the AIME is determined, that figure is run through the Social Security benefits formula to determine the primary insurance amount, which is the benefit a worker would receive if they claimed Social Security at their full retirement age.
Inflation impacts Social Security payouts through annual cost-of-living adjustments (COLAs). Benefits are modified each year based on changes in the third-quarter CPI-W, which itself measures how consumer prices change over time. For instance, the CPI-W increased 3.2% in the third quarter of 2023, so Social Security benefits will get a 3.2% COLA in 2024. Those annual COLAs ensure that benefits retain buying power as prices rise across the economy.
Here's the upshot: The average Social Security retired-worker benefit has increased each year since 2000. That phenomenon is due to payouts being tied to wages and inflation, both of which have increased over time. Indeed, the AWI has increased at roughly 3.1% annually since 2000, and the third-quarter CPI-W has increased at roughly 2.5% annually since 2000.
What the average Social Security benefit for retired workers could be in 2030
As mentioned, the average Social Security benefit for retired workers has increased at roughly 3.6% annually since 2000. If that trajectory remains constant over the next seven years, the average Social Security benefit for retired workers will increase 28% to reach $2,363 by November 2030.
To be clear, that number is merely an estimate. The precise increase depends on how wages and inflation trend over the next seven years. It also depends on workers' behavior. Benefits are adjusted for early and delayed retirement, so a meaningful shift in claiming age could also impact the average payout.
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Here's the Average Social Security Benefit for Retirees Right Now (and What It Could Be in 2030) was originally published by The Motley Fool
