Title: What's Typical for Social Security Benefits at Age 72?
Social Security wasn't meant to be the sole source of retirement income for anyone. Surprisingly, however, many individuals who rely on this program are doing rather well. Some are even thriving.
Just to clarify, the current 72-year-olds are among those receiving the largest monthly Social Security payments.
The Typical 72-Year-Old's Social Security Payment
Given the average monthly payment for all retirees currently stands at a modest $1,976, it's understandable if your expectations for the entitlement program's payouts are low.
However, a closer look reveals that this average can be misleading. The overall figure is being dragged down by individuals who claimed benefits prior to their Full Retirement Age (FRA) and consequently receive less than they could. It's also being affected by those in their 80s, born during or just before World War II, who, due to subpar wages and prolonged unemployment during their prime working years, contributed less to Social Security than those who followed them by a decade.
Despite these factors, the average 72-year-old is collecting a more substantial $2,786 monthly check. While this isn't overwhelming, it's a significant improvement over the overall average. The majority of retirees between the ages of 70 and 75 are seeing similar gains, outperforming both the sub-70 and 80-plus age groups.
The New Normal
So, why are retirees age 70-75 receiving larger checks than their older and younger peers?
A good portion of the answer lies in a stroke of fortune. Individuals born in the U.S. between 1950 and 1955, the heart of the baby boom, reached adulthood at a time of sustained economic growth. This period likely resulted in strong earnings for the majority of their working lives. It's important to note that their parents, aunts, and uncles didn't fare quite as well, and those born slightly before or after this five-year stretch also had successful careers. However, those born within this narrow window were perfectly positioned to capitalize on the peak of post-war prosperity.
They also enjoyed a boom in medical advancements. This not only extended their lifespan but also allowed them to work longer and contribute more to Social Security.
No matter the reasons, it's clear that Social Security payments alone are not sufficient to provide a retiree with a comfortable living. However, the 70-to-75 age group tends to have supplemented their income through personal savings and investments.
In 2023, the typical retiree between the ages of 65 and 74 had an income of $72,190 (or $6,015 per month). Less than half of this income originated from Social Security benefits. The remaining income came from pensions and personal retirement savings. This income was primarily spent on necessities such as food, housing, and healthcare.
It's worth noting that this dynamic is unlikely to change in the foreseeable future.
The finance strategy of many 72-year-olds includes relying on their Social Security retirement income, supplemented by their personal savings and investments. This diverse source of income allows them to manage their expenses, covering necessities like food, housing, and healthcare.
Given the improved financial situation of the average 72-year-old, retirement planning should consider not only Social Security payments but also an individual's personal savings and investment strategies.
