Average Social Security checks are meaningless…
In response to my video “Social Security is NOT Going Bankrupt” a subscriber sent me this link to a video by Chris Hogan via Prager U. The title is quite ominous: “Social Security Won’t Give You Security”.
Now, for the record, I LOVE Prager U and am a fan of Chris Hogan. But there are fundamental problems with this analysis.
First and foremost the average Social Security check is completely irrelevant…to YOU. Grandpa Jones is 93 yrs old and has been on Social Security for nearly 30 yrs. What do you think his check is?
Yet, Boomer Jane, who made on average 60k a year over her 35 yrs of Indexed Earnings, smartly waited until this year, when she is 70 to claim her benefit. 60k a year of indexed earnings equals an AIME of $5k which equals a PIA of $2136. But because she waited 4 yrs from her FRA to take her benefit she’ll get a 32% increase and thus her check will be $2820.
Let’s say her husband John didn’t work and “only” gets a spousal benefit. That benefit will be half of Jane’s PIA, which is $1068. Add those two numbers together and you get a benefit of $3888 a month or $46656 a year.
So, why focus on the average check which includes Grandpa Jones? Makes no sense at all.
Secondly, remember Jane and John were living on $60k a year while Jane was working. Right out the gate she lost 7.65% to FICA tax. She then loses another say $4k a year to Fed and State income tax. So, they’re only NETTING around $50k after tax.
Contributing to a 401k? probably, we’ll say 10% So, after 401k and taxes she’s really only bringing home around $45k a year or so.
And yet with a TINY bit of planning their Social Security can provide MORE income than what they were living on. And don’t forget SS is TAX FREE if it’s your only source of income.
Lastly, SO many people will say “but what about health costs”?
Well, how did Jane have health insurance when she was working? No doubt she was paying premiums for coverage for her and John. I imagine that was around $400 a month or so.
Fast forward to being on Medicare and Part B is $135 a month or so, Part D is around $35 a month. So, between them they are paying $340. Now factor in a Medigap policy of say $150 a month each and their insurance costs go up to around $640 or so. Higher than what they were paying before by a couple thousand a year, indeed. But this is a WHOLE lot different than saying Social Security won’t provide security.
Sure it will.