The average unemployment benefit will increase in 2022. That is the good news. The bad news is, it’s still lower than many people expect — and it’s still nowhere near enough to live on.
Here’s the reality of how much the typical retiree will receive in Social Security benefits next year, as well as some tips for increasing your benefits above average and supplementing the income these benefits provide.
This is the average benefit in 2022
In 2022, the average Social Security benefit for a retiree will be $1,657 per month. This is an increase of $1,565 in 2021. The large increase in the average benefit is caused by the fact that Social Security recipients will receive a cost of living adjustment of 5.9% in 2022 due to very high inflation.
While it’s good news that the average benefit will go up next year, the stark reality is that it’s not nearly enough to live on. A retiree receiving the average benefit would have an annual income of just $19,884. In most parts of the country, that is not enough to cover basic necessities.
This may be shocking, but it’s actually designed so that the average benefit isn’t close to paying everything a retiree needs. Social Security is believed to be one of many sources of support. It is intended to replace 40% of pre-retirement income, while the rest of the money a retiree needs comes from these other sources.
How can you beat the average Social Security benefit?
If you’re concerned about how low the average Social Security benefit is, there are steps you can take to try and get a monthly check greater than what the average senior receives. The options available to do that depend on how early in your career you start working towards increasing your Social Security checks, as well as whether you’ve already started your retirement benefits.
The best way to beat the average benefit is to earn an above-average income for as long as possible. Social Security benefits are equal to a percentage of inflation-adjusted income in the 35 years you earned the most. The more years you work for a higher salary, the higher your benefit will be compared to the average.
Delaying your Social Security application can also help you beat the average benefit. Many retirees claim in their early 60s, as you can first apply for checks at age 62. But by deferring at least until your full retirement age (FRA) you can avoid a cut due to early filing, while deferring to 70 your income for every month you wait. That’s because you earn deferred retirement credits after you reach full retirement age.
You still need extra savings
Unfortunately, whatever steps you take to raise your Social Security benefits above average will never be enough to live comfortably on. You need savings to continue enjoying the same quality of life as in the working world.
By investing in a tax-efficient retirement plan throughout your career, Social Security can play the role they’re meant to play, by acting as one of several sources of income you rely on once paychecks stop coming in for good.