A lot of retirees rely on Social Security as a main source of income in their later years. The Social Security Administration (SSA) says that almost 97% of adults between the ages of 60 and 89 either get these payments now or will get them in the future.
Because so many people depend on Social Security, it’s important to know what you can expect to get from the program in the future. You can’t know for sure how much you will get, but looking at past trends can help you guess how much you might get in the future.
The most you can get each month from Social Security in 2024 is $4,873. To get the maximum reward, though, you need to have worked for a long time and made a lot of money. The real return is a lot less for most people. It is said by the SSA that the average monthly payout for retirees is $1,907.
When you look back, you can see that benefits have been going up year after year. In 2000, for example, the average Social Security payment was $815.62. This number has more than doubled by 2024, which is an average growth of 3.6% per year.
Factors Driving the Increase in Social Security Benefits
There are two main reasons why Social Security benefits keep going up: rising wages and changes in inflation.
Wage Growth
One big reason why Social Security benefits have gone up over time is that wages have been going up. If a worker made the most money over 35 years, the SSA figures out how much money they should get. This amount is adjusted for changes in wages over time. This means that the more you earn over your lifetime, the more you’ll get in the end.
Over time, as wages rise, so do the perks that retirees get. Most of the time, workers make more money as they move up in their jobs, which helps this upward trend.
Inflation Adjustments
Inflation is another important reason why Social Security benefits go up. Benefits are changed every year to reflect inflation. This makes sure that payouts keep up with the cost of living. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is used to make these changes every year.
These changes in the cost of living, or COLAs, are very important for keeping Social Security payments useful. Inflation would make these funds less valuable over time if these changes aren’t made.
What to Expect in 2030
Based on the historical average annual increase of 3.6%, Go Banking Rates says that Social Security benefits will likely continue to rise. If this trend continues, the average monthly benefit could rise by about 28% over the next seven years, reaching about $2,363 by 2030.
This is just a guess, though. The real amounts of benefits will rely on things like future wage growth, inflation, and how workers spend their money, like when they retire.
It’s important to remember that even though Social Security payments are expected to go up, so will the cost of living. This means that even if retirees’ benefits go up, they might not feel like their cash situation has gotten much better.
A lot of retired people depend on Social Security. What the Center on Budget and Policy Priorities says is that the program helps more than 15 million older people get out of poverty. About 40% of people aged 65 and up would live below the poverty line without these benefits.
But there may be problems with future rewards. Experts have come up with a number of possible policy changes that could be made to deal with the coming shortfall.
These include raising the retirement age, increasing payroll taxes, and cutting benefits for people with higher incomes. These changes might make the program last longer, but they might also change how much future seniors get.
Social Security is now an important way for millions of people to make money. Even though payout amounts are likely to go up, Social Security alone might not be enough to cover your retirement costs.
With the possible changes to the program, it’s more important than ever to plan for extra income sources like IRAs, 401(k) plans, bank accounts, and other savings.