Why does Social Security pay so little in retirement?

Jeanine Joy, Ph.D., CEO, Trainer, Speaker, Author, Researcher at Happiness 1st Institute (2011-present)

Updated Aug 2 · Upvoted by Chris Smith, former Operations Supervisor (Retired) at Social Security Administration (1973-2011)

Social Security pays out based on what you pay into it.

If you do your best to get educated and do well in your career, Social Security at full retirement age will pay $34,332 a year at normal retirement age for someone who paid the maximum amount for the specified period of time into Social Security if they retire at normal retirement age.

That’s $2,861 per month.

If that same person retired at age 70 instead of 66 (the current normal retirement age) in 2019, they’d receive a bump up of 8% for each year they waited so their maximum monthly benefit would be $3,892 or $46,708 a year.

However, if someone dropped out of high school and never made more than minimum wage, they wouldn’t come close to paying in the maximum and their benefit would be much lower.

It isn’t that Social Security pays so little; it is that what you get out is based on what you (or your spouse) put in.

Whether to begin collecting at age 66 and receive the lower amount or wait until age 70 depends on many factors. It takes about 11 years of receiving the higher amount to offset the four years you don’t receive benefits when you could. My husband’s parents both lived until well into their 90’s so for him, it’s probably worth it. My dad is 83 and going strong so for me it will be worth it.

Social Security was never intended to be anyone’s sole source of retirement income. That’s why there are many tax-advantaged ways to save for retirement.