Social Security is a crucial aspect of retirement planning for millions of Americans. While there are exceptions, the majority of people invest significant portions of their careers in Social Security taxes, expecting to receive benefits later in life as a reliable source of retirement income.

Given how essential Social Security is for many retirees, it’s wise to know what benefits to anticipate, as this heavily depends on when you decide to start claiming them.

Estimating your exact benefit can be challenging, considering factors such as the yearly cost-of-living adjustment (COLA) and fluctuations in your earnings over time. However, looking at average monthly benefits can provide a useful starting point for planning your retirement finances.

How is Your Social Security Benefit Calculated?

Your monthly Social Security benefit is determined by your average earnings during your top 35 earning years.

Social Security adjusts these earnings for inflation (known as “indexing”) to reflect their value in today’s dollars. Then, it calculates your average indexed monthly earnings (AIME) by dividing the total amount by the number of months in those 35 years. For individuals with less than 35 years of earnings, zeros are factored in for the missing years.

After that, Social Security employs a formula with bend points (which vary each year) to establish your primary insurance amount (PIA)—this is the monthly benefit amount you’ll receive if you claim it at your full retirement age. Depending on your birth year, here’s what the full retirement ages look like:

How Much Does Social Security Increase from Ages 62 to 70?

Ages 62, 67, and 70 are pivotal points for Social Security benefits. At age 62, you can start claiming benefits, age 67 is generally considered full retirement age, and age 70 is when benefits no longer increase if you delay your claim.

If you claim Social Security at 62, your monthly PIA will be reduced by 30%. Conversely, if you wait until 70, your benefits can increase by about 24% (assuming a full retirement age of 67). Since these ages are commonly considered for claiming Social Security, here’s a look at average benefits expected at those ages:

Data source: Social Security Administration. Benefits are rounded to the nearest dollar.

While these amounts may fluctuate due to COLAs, they give a ballpark idea of what many individuals can expect when claiming at these ages.

Is Social Security Sufficient for Retirement?

What qualifies as a sufficient retirement income varies greatly. Considerations such as your location, spending habits, and retirement plans all affect how much you need.

A person living in Southern California and looking forward to traveling globally may need a larger retirement nest egg compared to someone wanting a quieter retirement in the Outer Banks of North Carolina. Typically, many find that relying solely on Social Security won’t cover all their retirement expenses.

Ideally, you should view Social Security as a supplementary source of retirement income. Unfortunately, this isn’t a realistic option for many families, as many rely entirely on it for their retirement income. However, for those who can afford to invest in retirement accounts and other assets, these strategies should certainly be prioritized.

Utilizing options like 401(k)s and IRAs can help you reduce your reliance on Social Security benefits.

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