Why the $4,194 maximum Social Security benefit is a fiction. Smart Change: Personal Finance

(James Brumley)

It may not be a huge amount, but it is certainly enough to live comfortably. Cashing out Social Security checks worth $4,194 each month generates more than $50,000 a year, which is roughly what the average American worker earns these days.

You’re Likely Actually Collecting the Maximum Monthly Social Security Payment $4,194However, there are shockingly thin. You would really do well to take home half of that amount.

But don’t be disappointed. There are many things you can do to increase your retirement cash flow.

Image Source: Getty Images.

more likely the amount is too low

Some people are getting the maximum payout to be clear, but many are not. Of the 47.2 million people currently receiving Social Security payments, only a little less than 1 million are banking on more than $4,100 per month. This is about 2% of the pool of beneficiaries.

so what kind of check Huh Seeing the most beneficiaries? The average monthly payment for 2022 is actually a much more modest $1,657.

Yes, that average is weighed down by a very high number of beneficiaries, very few… but not as much as you might think. More than 25 million people — not half of the entire beneficiary pool — see less than $1,500 per month from the Social Security Administration, and about 11 million of them bring home less than $1,000 per month from Social Security payments. Of those people, only a little over 2.2 million are depositing less than $500 per month.

On the other end of the spectrum, only 11 million people are seeing checks in excess of $2,000 a month, and most of them are barely above the $2,000-per-month mark. While the average payout is $1,657, the largest group of recipients are taking home between $1,700 and $1,800 per month. The graphic below tells the story.

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

Inequality and dispersion, of course, reflect the varying degrees of income all these people have earned during their working years. Those collecting the maximum monthly benefit of $4,194 now earned (give or take) the equivalent of 2022 for an annual salary of $147,000. 10 years ago, they were earning on the order of $110,000 per year. 20 years ago this figure was closer to $85,000.

In all three cases, those incomes are significantly higher than the average annual income at the time. Most people weren’t taking home that much at the time, and are no longer earning $147,000 per year. The Social Security Administration says the average person’s current annual income is just above $55,000.

And, as it turns out, earning that amount every year for 35 consecutive years (adjusting for inflation) will net you a monthly check of a little over $1,600 per month — on the current average — assuming you retire. Age 67. Retiring at age 62 with the same income means a monthly Social Security check of close to $1,000, but if you can wait until age 70 to start collecting, your payment will be as low as today. Will be a little over $2,000 in time. Dollar.

It’s Not Too Hard to Ballpark the Size of a Check you will be getting Once you do, ask the Social Security Administration to start sending checks. If you were the average earner (and most of us are by definition), you’d get average-sized checks. Only the highest paid earners will really maximize their benefits, and even then, they wait until age 70 to receive payments.

Not the end of the world

astonished? Maybe you’re a little disappointed at how much Social Security you’re not getting? Don’t sweat it.

The fact is, when you’re working you can easily build your own nest egg that generates income beyond what Social Security provides. For example, investing $20,000 in a S&P 500 (SNPIndex: ^GSPC) fund can be worth about $350,000 30 years later, if left alone that whole time. That cash-stash is able to generate on the order of an additional $9,000 worth of annual dividend income at today’s prevailing dividend yields.

Or, if you can pay $3,000 of your annual earnings into the stock market each year and reinvest any growth you’ve gained in the meantime, you’ll end up with about $900,000 over a 35-year period. Will give That alone is enough to generate more than $22,000 of dividend income each year — without a dip in principal — which is certainly a nice supplement to the Social Security you pay.

However, in both cases the key is timing. If you want to fund a comfortable retirement, you should start early and stick to your regular, recurring investment plan, because most of us retirees can’t even come close to the Social Security Administration’s maximum monthly payments. Would have been

The $18,984 Social Security Bonus Most Retirees Completely Overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a few little-known “Social Security secrets” can help ensure an increase in your retirement income. For example: A simple trick could pay you as much as $18,984 every year…! Once you learn how to maximize your Social Security benefits, we think you can retire confidently with peace of mind. To learn more about these strategies just click here,

James Brumley Have no position in any of the stocks mentioned. The Motley Fool does not hold any positions in any of the stocks mentioned. The Motley Fool has one Disclosure Policy,

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