A large part of retirees plan to apply for their Social Security benefits at some point. For those people whose retirement is still far away, they may be asking themselves the question about what the average Social Security amount will be in 15 years, when they are finally ready to retire or ready to do so. Calculating this takes more than just math, according to Martha Shedden, CFP and president and co-founder of the National Association of Registered Social Security Analysts.
According to Shedden, the current average Social Security benefit is about $1,900 per month. No one can accurately forecast what the economy will look like in 15 years or whether inflation will remain stable, but with the help of calculation software, a baseline estimate can be made.
“Assuming an inflation rate of 2.25%, the average benefit would be about $2,663 over 15 years,” Shedden said. “However, given the historical cost of living adjustments (COLA) over the last 20 years of 2.6%, the average benefit amount over 15 years will be closer to $2,802.”
In reality, for the person who receives it 15 years from now, Shedden said, $1,907 would still appear in their current budget. See the average Social Security benefit at each age right now.
Don’t Underestimate Your Benefits
While it’s true, you might think that people overestimate what they will receive, Shedden said it’s more normal for people to underestimate the amount of Social Security they will potentially receive. She and her husband were surprised to realize that together they were entitled to receive about $90,000 a year.
“The total amounts accumulated over the lifetime of some high-income couples who earned the maximum amount each year amount to millions,” Sheeden said.
The Meaning of Social Security for Americans
The goal of Social Security is not to bring in millions of people, Shedden said. This was created as a program to keep people out of poverty.
For those with lower incomes, there is usually a higher percentage of their total retirement assets, sometimes between 50% and 90% of the amount they will have when they retire.
“It’s important for low-income people to be informed and understand exactly what that amount will be,” Shedden said. “Because, for every month and every year that they can delay the collection, that amount will increase.”
That higher amount is subject to cost-of-living adjustments for the rest of their lives. For people who are on the poverty line, there is also supplemental security income (SSI).
“It’s not really a substantial amount,“ Shedden said, ”but it’s definitely a critical part of many Americans’ retirement.”
Get Ready for Potential Social Security Reductions
There is a big unknown about the fate of Social Security. According to Brian Kuhn, CFP and senior vice president of Wealth Improvement Group “If we consider the predictions of the Social Security Administration that benefits would need to be reduced by 23% near 2033 to maintain the stability of the program without legislative intervention, the average benefit would be affected by approximately $2,182.”
It is critical to remember that these benefits are only averages and that not all benefits are equal. You should also do everything in your power not to rely solely on Social Security in your retirement years.
“It’s never too early to start planning for retirement,” Shedden said. “The importance of starting to save early and seeing how it grows cannot be overstated.”