What To Know About Social Security If You’re in Your 50s

For most Americans, Social Security seems like a distant concept throughout most of their work careers. But, if you’re now in your 50s, you’ll be filing for Social Security benefits before you know it. Rather than thinking that Social Security is far away and will sort itself out by the time you retire, it’s time to start actively planning for how and when you will receive your benefits.

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The actions you take now can directly affect how much income you’ll earn in retirement, so here’s what you’ll need to know about Social Security if you’re in your 50s.

There are two factors that determine the size of your Social Security checks: the age you start drawing benefits and the amount you earn over your working career.

Once you’re in your 50s, your annual earnings are generally the highest of your entire career. A solid decade of earnings in your 50s can really boost your ultimate Social Security check, since your payout is based on your 35 highest years of earnings. Thus, high earnings in your 50s serve the dual purpose of both boosting your take-home pay and pumping up your future Social Security checks.

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The earliest age you can file for Social Security benefits is 62, which, if you’re in your 50s, means that’s only 3-12 years away. But, if you claim your benefits early, you’ll face a reduction in your monthly checks of 30% for the rest of your life. In other words, if you are due to receive an $1,800 monthly benefit at full retirement age of 67, your checks at age 62 would be just $1,260.

No matter how much you earn in your career, the highest possible Social Security check as of 2022 is $4,194 — even if you wait until age 70 to claim benefits. That amounts to $50,328 per year.

While that might seem like a decent amount, it’s well below the 2020 median household income of $67,521. Considering that is the maximum possible Social Security benefit, it likely means you were used to earning well over $100,000 per year for the bulk of your career. If you earned the average Social Security benefit instead, you’d draw just $1,657 as of January 2022, or $19,884 per year.

The bottom line is that no matter what you earned while working, your Social Security benefit on its own is likely to leave you short of the lifestyle you want to lead.

At any time, you can look up your projected benefit on the Social Security website at ssa.gov. But if you’re 50, a lot can change before you actually start drawing checks.

According to the latest reports, the Social Security Trust Fund is expected to be depleted by 2033, meaning benefits might drop to 76% of current levels. If you’re 50 now, this puts the benefits reduction one year before you’re eligible to file.

While it’s possible that some type of legislative or governmental action can help prevent this, you should be mentally and financially prepared for the fact that your Social Security projection may not come to fruition.

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Recognizing that most Americans face a retirement savings shortfall — one that may be exacerbated if Social Security also cuts benefits in the future — the IRS allows taxpayers to make “catch-up” contributions to retirement accounts after hitting age 50. If you have an IRA, you can put in an additional $1,000 per year, for a total of $7,000 as of tax year 2022.

If you contribute to a 401(k), the catch-up provision is much more significant. On top of the regularly allowable maximum contribution of $20,500, those 50 or older can put in an additional $6,500, for a total of $27,000.

Social Security was never meant to replace all of your working income. Indeed, depending on your income in your career, Social Security is likely to replace just 30% to 50% of your prior salary. Knowing this ahead of time can help you both boost your benefit as much as possible and plan your outside retirement savings strategy accordingly.