Social Security was established in 1935. It has become the primary source of income for the majority of elderly Americans providing $1.2 trillion in benefits to 70 million people in 2021. For about half of seniors in the United States, Social Security provides at least 50% of their income. Additionally, it provides at least 90% of income for about a quarter of all seniors.
But Social Security should not be looked at as the sole source of anyone’s retirement income. It is more of a baseline supplement to a retiree’s savings, investments, and/or pension. The average monthly retirement benefit is about $1,500 per month. It is just above the national poverty level of $1,452 for a two-person household.
Over the last decade, Social Security Cost of Living Adjustments (COLA’s) has not kept pace with inflation. Since 2011, the average COLA increase has been 1.6% while inflation during that time has risen by 2%. If a retiree is living primarily on Social Security they are not keeping ahead of inflation. In fact, they are losing money. The good news is that in 2023 a COLA increase of over 8% is expected to be announced in October. Seniors deserve a raise!
But there are some strategies to help people on Social Security get the most out of their money:
1. People qualify for Social Security at age 62. However, the longer they wait to start collecting up to the age of 70, the more they will get.
- As of 2021, the monthly benefit level for a person who retires having paid in the maximum contributions is $2,324 if starting at age 62 but $3,895 if starting at age 70.
2. The spouse of a deceased or divorced partner can collect a higher amount based on their ex’s benefits if they are higher than their own.
3. If a person is going to re-marry, they can still collect based on their ex-spouse—but only if they re-marry after reaching the age of 60.
4. In the case of divorce, an ex-spouse can collect up to 50% of the other’s benefit if they are 62 or older, were married at least 10 years, and are single.
5. A person can continue to generate an income while on Social Security without owing any tax penalty against their benefit as long as it is at $18,960 for an individual in 2021.
Do you want to learn more about how you can retire like a genius? Listen to my podcast where you will learn the practical strategies that have worked for others in a conversational style that destigmatizes aging and insists the best is yet to come!