Earnings gaps in the world of work persist after you start collecting Social Security retirement benefits, albeit on a smaller scale.
Benefits are based on the amount of money you earn during your career. The higher your income, the higher your retirement control. Similarly, Americans in the lowest income brackets will also receive lower than average Social Security benefits.
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One thing about Social Security is that it is not a “fair” program, even though some people like to call it that. It functions more like a government-run pension program. You’re not “entitled” to Social Security retirement benefits—you earn them by working a certain number of years and paying into the system through payroll taxes.
You need at least 10 years of work, or 40 credits, to qualify for Social Security retirement benefits, according to the Social Security Administration. Benefits are based on indexed average monthly earnings for up to 35 full years of employment. The 35 years with the highest income are used in the calculation.
If you work a full 35 years, you can maximize your Social Security check. If you work less than 35 years, your benefit won’t be as big – no matter how much you earned during your career. A “zero” on your earnings record can put a big dent in your benefits if you’ve worked less than 35 years. That’s because zero will reduce your average monthly index income.
Americans who earn lower-income wages while working will naturally receive a lower Social Security check after they retire. As of March 2024, the average retirement benefit was $1,864.52 per month, according to the Social Security Administration. The maximum payment for Social Security recipients in 2024 is $4,873 per month, and you can only get it by earning a very high salary over 35 years.
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The SSA does not track average benefits by income group. However, the Center on Budget and Policy Priorities conducted an analysis last year that looked at average Social Security benefits by income category.
According to that analysis, the average annual Social Security benefit is $14,824 for a low earner (making 45% of the median wage) retiring at age 65. This works out to a monthly average of $1,235 per month – or roughly two-thirds of the average overall benefit.
A special minimum Social Security benefit was created in 1972 to benefit low-income workers. To qualify, you must have at least 11 years of Social Security coverage, according to the SSA. A coverage year is each year an employee pays a “substantial amount” into the Social Security Trust Fund, SmartAsset reported.
The SSA website provides a chart that breaks down separate minimum benefits. The table refers to “maximum family benefits” based on the Primary Insurance Amount (PIA), which is the benefit you will receive if you choose to start receiving pension benefits at your full retirement age.
To receive the minimum full special PIA, workers must have at least 30 years of coverage. Starting in 2023, the maximum family benefit for Social Security recipients who qualify for the special minimum benefit ranges from $77.80 to $1,281.80 per month.
Another thing to remember is that your Social Security check is also determined by when you decide to start claiming benefits. You can apply for Social Security as early as age 62, but your payment will be lower than if you waited until later. You receive the full benefit due at full retirement age and the highest possible benefit at age 70.
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This article originally appeared on GOBankingRates.com: How big is the average low-income retiree’s Social Security check?
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