Middle-Class Retirees: How Social Security Can Help or Hurt Your Retirement Plan?

Social Security plays a big role in the retirement plans of many middle-class Americans.

For many retirees, it acts as a safety net that helps cover living expenses when they stop working. However, relying solely on Social Security benefits might not provide enough to live comfortably.

Let’s take a closer look at how much the average Social Security check is for middle-class retirees, and how they can increase their benefits.

What the Average Middle-Class Retiree Collects

According to the U.S. Census Bureau, the national middle-class income range in 2022 was between $49,271 and $147,828.

However, this amount can vary depending on where you live, as the cost of living can affect the amount needed to maintain a middle-class lifestyle. The median household income in the U.S. was about $74,580 in 2022.

If you’re 55 years old today and plan to start collecting Social Security at age 62, you could expect to receive about $1,869 per month.

That adds up to roughly $22,428 per year. This is based on estimates from AARP’s Social Security calculator.

While this amount can help supplement your income, it might not be enough if you don’t have other savings or investments. In fact, according to AARP, one in five Americans over 50 have no retirement savings at all.

The problem with relying solely on Social Security is that it can leave you close to the poverty line.

The U.S. Department of Health and Human Services set the poverty line at $15,060 for a single person in 2024. So, without savings, a middle-class retiree living off Social Security benefits might find themselves in a tight financial situation.

Social Security Benefits: A Closer Look

Social Security benefits aren’t fixed; they vary based on factors like your work history and the age at which you start claiming benefits.

There’s also a lot of uncertainty about how sustainable Social Security will be in the future, which is why some financial experts recommend not relying solely on it.

Strategies to Maximize Social Security Benefits

While Social Security might not be enough to fully support retirement, there are strategies to increase your monthly check.

1. Delay Claiming Benefits:

The most effective way to increase your Social Security benefits is by delaying the start of your payments.

You can begin receiving benefits as early as age 62, but your monthly check will be smaller if you start early. If you wait to claim your benefits, your monthly payments will increase.

For example, let’s use a 55-year-old who plans to start Social Security at 62 and would get $1,869 per month.

If they wait until they are 65, the monthly benefit would rise to $2,314. If they wait until they are 67, it would increase to $2,670, and if they wait until they are 70, the monthly benefit could be as high as $3,311.

2. Maximize Earnings:

Social Security calculates your benefits based on your highest 35 years of earnings. So, the more you earn during your career, the higher your Social Security check will be.

Pursuing higher-paying jobs and working for as many years as possible can help you increase the amount you’ll receive in retirement.

3. Understand Spousal Benefits:

If you’re married, your spouse may be able to claim benefits based on your work history. This could be up to 50% of your benefit amount, which can be especially helpful if one spouse had lower earnings during their career.

Additionally, widows and widowers can claim survivor benefits, which might also provide a higher monthly check.

4. Account for Inflation Adjustments:

Social Security benefits are adjusted for inflation each year through cost-of-living adjustments (COLA).

This means your benefit should increase over time to keep up with rising living costs. Planning for these adjustments can help you better understand how your benefits might grow.

5. Consider Tax Consequences:

Depending on your total income, Social Security benefits may be subject to taxes. If you have other income sources, like pensions or investments, these can increase the amount of your Social Security check that gets taxed.

Being aware of the tax implications can help you plan better for your retirement.

6. Explore Other Income Streams:

While maximizing Social Security benefits is important, it shouldn’t be your only source of income in retirement.

Many retirees supplement their Social Security checks with part-time work, rental income, or investments. Diversifying your income sources can provide financial security and reduce reliance on Social Security alone.

Conclusion

Social Security benefits are a key part of many retirees’ income, but they are not enough to fully support most middle-class Americans in retirement.

For a 55-year-old earning the median U.S. income of $74,580, the monthly benefit could be just over $1,800 if they start at 62. While this might cover some expenses, it’s not a guarantee of financial comfort.

To get the most out of Social Security, retirees should consider delaying their benefits, earning more during their career, understanding spousal benefits, accounting for inflation, and planning for taxes.

It’s also a good idea to have other income streams in place to avoid depending entirely on Social Security.

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