How Does Your Social Security Benefit Compare To Others?

How would you like a $4,000 monthly Social Security check?

I thought that would get your attention.

It’s not common, I can tell you that.  A check that large is more than double the average retiree’s $1,413 benefit.  But figures from the Social Security Administration tell us that 1,352 individuals receive $4,000 or more.

How the benefits are distributed

Since 43.1 million retirees receive monthly checks, those big checks are as rare as zen calm at the Texas/OU game.  We can see how scarce big checks are by taking a closer look at the Social Security data. Here’s a distribution analysis using the figures for retiree benefits from June:

If you are retired, you can see where you rank among other retirees by comparing your monthly check before deductions for Medicare with the figures in the second column. If you aren’t retired, you can get a rough idea of where you will be by using one of the online tools for estimating your future benefit.

You can use the estimator here: https://www.ssa.gov/benefits/retirement/estimator.html

Or you can use the detailed calculator here: https://www.ssa.gov/oact/anypia/anypia.html

The cornucopia of virtual wealth

Social Security is a form of virtual wealth. It isn’t wealth that you have, spend all at once or pass on.  But you’d need to have a lot of money in savings to provide the same amount of interest income as any Social Security benefit. In fact, studies have shown that Social Security “wealth” is greater than all other forms of wealth for 90 percent of all Americans. For many, that virtual wealth is the whole ball game.

You can get an idea of just how valuable Social Security is as a substitute for actual savings by working through a few calculations. Here’s the amount of you’d need to have in a 10-year Treasury securities at their recent yield of 3.15 percent. (Note: The dollar value of the needed Treasurys would be much higher at the low interest rates of a few years ago. The dollar value will be lower if interest rates continue to climb.)

—Top 1 percent, or $2,900/month                              $   1,104,762

—Top 5 percent, or $2,400/month                              $     914,286

—Top 10 percent, or $2,200/month                            $    838,095

—Top 25 percent, or $1,800/month                            $     685,714

—Benefit of Medium Lifetime Worker @65, 2018    $    612,695

—Average retiree check, or $1,413/month                  $    538,286

—Top 50 percent, or $1,300/month                            $     495,238

—25^thpercentile, or $900/month                                 $     342,847

Comparing virtual wealth to 401(k) plans and existing home prices

—In August the National Association of Realtors reported that the median existing home resale price was $264,800.

—The Employee Benefit Research Institute recently reported that the average 401(k) account balance for workers with at least 30 years with the same employer was slightly higher, $287,533, in 2016.  As you might expect, workers with fewer years of tenure at their employer had lower account balances.

The important observation here is that both figures are well below the lowest value for the virtual wealth of Social Security. This program sustains, or is , the living standard for 43 million retirees.

OK, so why am I writing about this?

Many politicians haven’t grasped how important Social Security is. Democrats love to be generous with other people’s money. So they routinely offer new and imaginative expansions of benefits as if the program was overfunded.  It isn’t. It’s seriously underfunded. Republicans are the opposite. Modeling themselves on Ebenezer Scrooge, they regularly offer new ways to cut benefits for our children and grandchildren. (They’d do it to retirees, too, but they are rightly fearful of angry, silver-haired mobs.)

We need to have more sense, and better perspective, than the bozos we elect.

Related columns:

Coming Sunday: Scott Burns, “Senator McConnell: Looking for Cash in All the Wrong Places,” 10/21/18

Scott Burns, “Lower wage workers also likely to lose in Social Security Reform,” 1/06/17   https://scottburns.com/lower-wage-workers-also-likely-to-lose-in-social-security-reform/

Scott Burns, “Social Security Reform: If You’re Under 50, Watch Out,” 12/30/16  https://scottburns.com/social-security-reform-if-youre-under-50-watch-out/

Scott Burns, “The Thinness of Wealth,” 5/24/2015  https://scottburns.com/the-thinness-of-wealth/

Sources and references:

Social Security Administration, Number of Beneficiaries by Benefit Level  https://www.ssa.gov/oact/ProgData/benefitlevel.html

Social Security Trustees Report 2018,  https://www.ssa.gov/oact/TR/2018

Ycharts.com U.S. Existing Home Median Sales Price data   https://ycharts.com/indicators/sales_price_of_existing_homes

“401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2016,” Employee Benefit Research Institute, September 10, 2018   https://www.ebri.org/pdf/briefspdf/EBRI_IB_458_K-update.10Sept18.pdf

This information is distributed for education purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.

Photo: Scott Burns: warning flags

(c) Scott Burns, 2018