If I Make $60,000, How Much Will Social Security Pay Me?

Social Security provides a huge portion of the retirement income that Americans rely on. Even if you're fortunate enough to earn $60,000 a year, which is slightly above the latest available median household income of about $54,000, you'll need Social Security to play its part in helping you make ends meet after you retire. By knowing exactly what to expect, you can make plans about how much you'll need to set aside on your own using special retirement accounts like 401(k) plans at work and IRAs. Running the numbers will give you a good starting point, telling you not only how much you paid into the system but also how much you might get out of it.

How much you'll pay in Social Security taxes

If you make $60,000 in annual salary, then you'll pay taxes into the Social Security system on all of your income. There's a wage base limit on Social Security taxes, but at $127,200, the amount for 2017 is well into the high-income category. With current taxes of 6.2% going to Social Security, you'll have $3,720 withheld from your paychecks over the course of the year. Another $3,720 will go into the system on your behalf, paid directly by your employer.

The upside of paying taxes on all of your compensation is that all of your earnings are included in calculating how much you'll get in your monthly Social Security checks when you retire. You'll get the maximum number of four work credits for the year, which will count toward the 40 credits you need to qualify for retirement benefits. Those credits will also apply toward Social Security disability benefits if something happens to you during your career.

How Social Security calculates your benefits

Unlike some private pensions, Social Security payments are based on your work history throughout your entire career. To come up with your monthly payment, the Social Security Administration looks at the 35 best-paid years of your career, adjusting earlier years for inflation to allow for apples-to-apples comparisons.

You therefore can't game the Social Security system by having a year or two of high earnings. If you've made $60,000 your entire career, then you'll get more in benefits than if you recently got a big promotion that took you up to the $60,000 mark for the first time.

How much you'll get from Social Security in retirement

Many workers are fortunate enough to get at least small raises each year, so for our example, we'll assume that you earned exactly the amount in past years that translates to an inflation-adjusted $60,000 per year in 2017. In that situation, average indexed monthly earnings are $5,000. Using the SSA's benefit formula for those first eligible to take Social Security in 2017 gives you the following calculation:

• You get 90% of the first $885 in average indexed monthly earnings. That works out to $796.50.
• Then, you get 32% of the amount up to $5,336 per month. In this example, that takes care of the remaining $4,115, and 32% of that amount is $1,316.80.
• Add those two figures together, and you'll get $2,113.30 per month.

That figure is just the starting point, representing what your monthly checks would be if you wait to claim benefits at your full retirement age. If you were born in 1955 and are claiming benefits at your earliest possible age of 62, then the SSA will reduce your monthly payments to reflect the fact that you're claiming 50 months before you reach 66 and two months, the full retirement age for those born that year. The reduction is just under 26%, leading to a figure of about $1,567 per month.

If you wait longer beyond full retirement age, you can get more in benefits. The monthly amount rises 8% for every year you wait, maxing out at age 70. That can give you more than 30% higher benefits if you don't claim until the latest opportunity. Keep in mind, though, that the numbers won't be exactly the same, because the SSA benefit formula changes each year and is based on the age at which you were first eligible for benefits.

How much Social Security will help you

Social Security was never meant to replace all of your work income, but it does a reasonable job of taking care of a piece of it. The $2,113 figure above translates to more than two-fifths of your pre-retirement salary, and most Social Security recipients don't have to pay income taxes on any of their benefits.

If you make $60,000 a year, you can expect Social Security to play a big part in your financial security in retirement. You'll still need to make some other plans to bridge the gap between your salary and what Social Security pays you, but your monthly checks will get you a fair amount of the way to your goal.

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