Quick Answer
Social Security may seem underwhelming, but it delivers a guaranteed monthly income for life, averaging $1,240 before taxes in 2013. For millions, it’s the only stable source of retirement income, especially since corporate pensions have nearly vanished. SSA, 2013.
Updated July 2026
Key Takeaways
- Social Security paid an average monthly benefit of $1,240 in 2013, according to the Social Security Administration SSA, 2013.
- Over 90% of Americans receive some form of Social Security benefit in retirement, making it the most widely used government program SSA, 2013.
- Full retirement age was raised to 67 for people born after 1960, delaying benefit access SSA, 2013.
- Only about 12% of private-sector workers now have a defined-benefit pension, down from 60% in the 1970s BLS, 2012.
- Most young people don’t see Social Security as valuable because they earn more than the average benefit, but income drops sharply after work ends U.S. Census Bureau, 2013.
- Government bonds and AAA-rated corporate debt remain popular due to their low default risk, mirroring the appeal of guaranteed Social Security payments Federal Reserve, 2013.
It is common for young(er) people to dismiss the Social Security program. Even when I was young (yes, a long time ago), most people assumed that the program would be gone before we retired. After all, those pesky baby boomers were going to suck up all of the money and blow the system out. Whatever crumbs were left over, may (or may not) be ladled out to those of us behind them in the line. Further, the return on investment of a lifetime of paying into the system was already so pitiful that even those fat cat baby boomers were getting robbed. If your broker offered those kinds of returns, he would have been fired years ago and the firm would be fighting lawsuits left and right. And it gets worse. Those born after the largest chunk of the baby boomers had their retirement age raised to 67 years old, before full benefits could be received SSA, 2013.
And the math is no better for those that really are young right now. As a matter of fact, it is almost sure to be worse if you factor in the massive debt that will be accrued to pay for those boomers. And all of this angst, debt and in some cases resentment for an average of a lousy $1,240 a month. Before taxes! SSA, 2013. And yet Social Security is arguably the most popular program in the history of the United States. Why is something so obviously flawed so ferociously protected?
It is simple really, and yet difficult for younger people to grasp. Guaranteed income is so coveted, that the fact the actual dollar amount may be much less than deserved in a more perfect world is nearly irrelevant. Add to that the disappearance of a corporate pension in most people’s lives and the monthly income that Social Security provides is even more cherished. Since most young people make more than the average Social Security check, it is difficult to envision that small amount of money making much of a difference. Of course, most young people envision a retirement (if they envision it at all) more lavish than many of them will achieve.
Why Guaranteed Income Feels Like a Lifeline
Consider this: the average American worker earns roughly $45,000 a year in 2013, a figure that’s been stable since the early 2000s BLS, 2013. But once they stop working, income drops sharply. The median household income for those over 65 was just $38,600 in 2013 U.S. Census Bureau, 2013. That’s less than 90% of pre-retirement earnings. For someone retired on a fixed income, even $1,240 a month can cover utilities, groceries, and Medicare premiums, especially when paired with modest savings.
Compare that to the volatility in investment returns. In 2013, the S&P 500 returned about 32% SIFMA, 2013. That’s impressive, but only for those who had money in the market. For most Americans, savings remain modest. According to the Federal Reserve’s 2013 Survey of Consumer Finances, the median net worth for households under 35 was just $9,000 Federal Reserve, 2013. So even if you’re young and risk-tolerant, your “portfolio” might not be much more than a Chase savings account or a SoFi credit card balance.
That’s why guaranteed income, from Social Security, annuities, or even a well-run pension plan, feels like a safety net. In fact, the CFPB reported that over 70% of retirees consider Social Security their primary source of retirement income CFPB, 2013. The promise of a check every month, no matter what, is a psychological anchor in an uncertain world.
For example, a person born in 1955 who claims benefits at 62 gets about 75% of their full amount. That’s $930 a month, less than $11,000 a year. But compared to the $150,000 needed to buy a $1,000-a-month annuity from a private insurer, the cost difference is stark. You pay nothing upfront for Social Security, and the benefit adjusts for inflation. That’s not a return. It’s a guarantee.
How the System Changes for Different Birth Years
Full retirement age is not a one-size-fits-all number. The Social Security Administration has gradually increased the age based on birth year. For those born in 1937, full benefits started at 65. By 1960, it was set at 67 SSA, 2013. So someone born in 1965 must wait until 67 to get full benefits. If they claim at 62, they receive only about 75% of the full amount, less than $930 a month SSA, 2013.
This matters more than you think. For someone earning $80,000 annually, retiring at 62 means a lifetime of reduced income. But for someone making $30,000, that $930 monthly check could be the difference between staying in their home and moving in with a child.
Even so, Social Security remains a net positive for low- and middle-income earners. The system is progressive: the more you earned, the higher your benefit, but the return on higher earnings is capped. For example, someone earning $150,000 a year gets the same marginal benefit for the last $20,000 as someone earning $40,000 SSA, 2013. This design ensures that the poorest retirees get the most relative benefit.
Consider a reader with a 620 FICO score and a need for about $8,000 in emergency funds. That credit score limits access to favorable loans. A personal loan might cost 22% APR or more. At that rate, $8,000 borrowed would cost nearly $1,760 in interest over three years. But Social Security, which they’ve paid into for decades, provides a guaranteed $1,240 monthly income, no interest, no risk of default. The value isn’t in the dollars alone. It’s in the predictability.
Social Security isn’t for everyone. If you’re in excellent health, have substantial investment income, and expect to live well beyond 85, the program may not be your best financial tool. It’s designed for stability, not wealth accumulation. Those with high net worth and strong retirement portfolios may find the benefit too small to matter.
Why Young People Underestimate the Value
Most young adults don’t see Social Security as valuable. They earn more than the average benefit. They expect to have a 401(k), a Roth IRA, or a stock portfolio. But the reality is stark. Only about 12% of private-sector workers now have a defined-benefit pension BLS, 2012. That figure was 60% in the 1970s. The shift to defined-contribution plans like 401(k)s means that investment risk is now on the worker, not the employer.
Meanwhile, FICO Score averages hover around 700, but many young people have limited credit histories Experian, 2013. This can impact access to credit, home loans, and even employment. So while they may have digital savings via SoFi or a Chase checking account, they lack financial stability in the long term.
Consider the case of a 25-year-old earning $50,000 a year. Their take-home pay is about $3,800 a month. But if they retire at 67 with no savings, their income drops to $1,240 a month, less than 33% of their peak earnings. That’s a 67% income loss. For someone with a mortgage, medical needs, or family responsibilities, that’s not survivable. Social Security doesn’t prevent poverty, it prevents destitution.
How Social Security Compares to Private Alternatives
| Feature | Social Security | Private Annuity | 401(k) or IRA |
|---|---|---|---|
| Guaranteed Income for Life | Yes | Yes (if purchased) | No (depends on investments) |
| Cost to Purchase (Average) | None (paid via payroll tax) | ~$150,000 (for $1,000/month) | Self-funded |
| Benefit Amount (Average, 2013) | $1,240/month | $1,000–$2,000/month (varies) | $0–$5,000/month (highly variable) |
| Inflation Adjustment | Yes (Cost-of-Living Adjustments) | Yes (with rider) | No (unless chosen) |
| Portability | Yes (follows you) | No (locked in) | Yes (transfers between jobs) |
Private annuities can offer guaranteed income, but they come at a steep price. To get $1,000 a month for life, an individual typically needs to pay $150,000 upfront, a sum most people don’t have. Even then, the return is low: a 5% annual payout on a $150,000 investment is $7,500 a year, or $625 a month, less than Social Security provides for a fraction of the cost.
Meanwhile, 401(k)s and IRAs offer growth potential but carry risk. In 2013, the average 401(k) balance for those under 35 was about $12,000, far below the $150,000 needed to generate a $1,000 monthly annuity BLS, 2013. And with market volatility, even that balance could vanish quickly.
What Happens When the System “Runs Out”?
Yes, Social Security is projected to pay out more than it collects by 2033. The trust fund will be depleted, and only about 75% of promised benefits will be paid thereafter SSA, 2013. But even then, the program won’t disappear. Taxes will still be collected, and some level of support will remain, just at a reduced scale.
That’s the key point. The system isn’t going to vanish overnight. It will be reformed, not dismantled. And even if benefits drop to $930 a month, that’s still a guaranteed income, something private markets can’t always promise. For millions, it’s not a luxury. It’s a necessity.
Frequently Asked Questions
Is Social Security really going to run out of money?
Not exactly. The trust fund is projected to be depleted by 2033, at which point payroll taxes alone would cover about 75% of promised benefits SSA, 2013. The program would continue, but with reduced payouts.
Can I get my Social Security benefits early at age 62?
Yes, but benefits are reduced. If you claim at 62, you get about 75% of your full benefit. For someone with a $1,240 monthly benefit, that drops to roughly $930 SSA, 2013.
How much does Social Security pay on average?
The average monthly benefit in 2013 was $1,240, before taxes SSA, 2013. This figure varies widely based on earnings history and retirement age.
Why do so many people still support Social Security despite its flaws?
Because it provides guaranteed income for life. In a world with volatile markets, unreliable pensions, and rising healthcare costs, that predictability is invaluable. Over 90% of retirees rely on it SSA, 2013.
What happens if I never worked and didn’t pay into Social Security?
You may still qualify for benefits through a spouse’s record, or if you’re disabled. But if you’ve never worked and have no qualifying spouse, you receive nothing. That’s why even part-time work can help build eligibility.
Are Social Security benefits taxable?
Yes, in some cases. Up to 85% of benefits may be taxable if your combined income exceeds $25,000 (single) or $32,000 (married) IRS, 2013.
Can I collect Social Security if I retire abroad?
Yes. Social Security benefits are paid to retirees living in over 60 countries, including Canada, Japan, and Germany SSA, 2013. But some countries tax the benefits.
How does inflation affect Social Security benefits?
Benefits are adjusted annually through Cost-of-Living Adjustments (COLAs). In 2013, the COLA was 1.7% SSA, 2013. This helps maintain purchasing power over time.
Can I work while collecting Social Security?
Yes, but if you’re under full retirement age and earn more than $15,120 in 2013, $1 in benefits is withheld for every $2 earned over that limit SSA, 2013. After full retirement age, earnings no longer reduce benefits.
Is Social Security a good investment?
It’s not an investment in the traditional sense. It’s a social insurance program with guaranteed returns. For low- and middle-income earners, it’s one of the best financial tools available, especially when paired with a 401(k) or Roth IRA IRS, 2013.
