Here's the Average Social Security Check for Someone Who Made $500K Their Whole Career
Half a million dollars sounds like a lot of money. But if that’s what you earned over an entire 35-year career, your Social Security check could be closer to $1,450 a month. That’s well below the $2,085.98 average monthly benefit retired workers received in July, according to data from the Social Security Administration.
Here’s why the number comes out that way and why two people with the same lifetime earnings can still end up with different checks.
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Why So Little?
The key is that Social Security doesn’t treat $500,000 in lifetime earnings like a retirement account balance. It looks at your 35 highest years of earnings, adjusts older earnings to account for wage growth, and then uses that record to calculate your benefit.
In this example, the worker earned $500,000 evenly over 35 years, or about $14,286 a year. After Social Security applies its indexing and benefit formula, the estimated monthly check comes to roughly $1,450 at full retirement age.
That’s why the lifetime total can sound much bigger than the check you get each month.
Same Earnings, Different Checks
Two people can each earn $500,000 over their careers and still get different Social Security checks.
Ernie Wingard, a registered financial consultant and advisor at Capital Choice Financial Group, said when the money was earned matters because older earnings can carry more weight than newer earnings.
Work history matters, too. If Social Security has fewer than 35 years of earnings to use, the missing years count as $0. Claiming age can also change the final monthly check. Claiming early can mean less each month, while waiting longer can increase the benefit.
What a $1,450 Actually Covers
Wingard said a Social Security check around this size might cover power, water, a few other utilities, and some food.
That pressure tracks with recent Consumer Price Index data. Food costs are up 3% from a year ago, medical care costs are up 2.7%, and housing is up 3.2%.
“If I see someone with a thousand dollars a month in projected Social Security benefit and that is all they are planning on, I am concerned about their retirement future,” Wingard said.
Check Your Number
The $1,450 estimate is a useful example, but it’s not a promise.
Wingard said workers should start by checking their actual earnings record on SSA.gov. That matters because missing earnings can affect the calculation, and each person’s work history is different.
SSA also shows projected benefits at different claiming ages, including age 62, full retirement age and age 70.
“It (the website) gives you a place to start to figure out what is going to be the more likely spot you might want to claim,” Wingard said.
Bottom Line
Most people would probably expect earning $500,000 over a working life to result in a bigger Social Security check. In an ideal world, maybe it would. But that’s not the world retirees are living in.
That’s why Wingard talks about retirement as a three-legged stool: Social Security, a pension and retirement savings. Social Security is just one leg. Retirees and those nearing retirement may need to shore it up with the other two to create enough income for the years ahead.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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