Warren Buffett will turn 94 on Aug. 30, 2024, and he still hasn’t retired. Buffett continues to serve as chairman and CEO of Berkshire Hathaway, just as he has for over five decades.
The legendary investor has been eligible for full Social Security retirement benefits since 1995. With his net worth close to $138 billion, you might think Buffett would automatically receive the maximum monthly benefit possible. But that’s not the case.
Why Buffett’s billions don’t count
Buffett’s billions don’t count when the Social Security Administration (SSA) calculates his retirement benefit. He could be worth $138 trillion, and it wouldn’t matter. The SSA doesn’t use net worth — it uses earnings. To be specific, the agency uses the earnings from a person’s 35 highest-paid years during their career.
Determining the 35 highest-paid years in a person’s earnings history is only the first step in calculating Social Security retirement benefits. Next, the SSA adjusts those earnings to reflect changes in overall wage levels during the period to compute an average indexed monthly earnings (AIME) figure.
The agency then uses this AIME in a formula to calculate the primary insurance amount (PIA). Is this PIA the amount received in the monthly Social Security check? Sometimes.
If a person claims retirement benefits before full retirement age (FRA), the PIA will be reduced by up to 30%. On the other hand, if a person holds off on claiming benefits past the FRA (up until age 70), benefits will be increased.
Estimating Buffett’s Social Security benefit
So how big is Buffett’s Social Security check? It’s possible the billionaire doesn’t receive one. Individuals can choose to waive their Social Security benefits. However, assuming that Buffett didn’t take this option, we can estimate how much his monthly Social Security check is.
Berkshire Hathaway’s proxy statements filed to the U.S. Securities and Exchange Commission (SEC) reveal that his salary has been $100,000 since 1980. He has also received additional income from serving as a member of the board of directors of Berkshire and other companies in the past.
When Buffett reached his full retirement age in 1995, the maximum taxable earnings amount for Social Security was $61,200. Going back 35 years before then, the maximum was only $4,800.
It seems reasonable to conclude that Buffett has earned at least the annual maximum amount over the years. If this assumption is correct, he would receive the maximum possible Social Security retirement benefit today of $3,822 if he claimed benefits at his full retirement age. If he waited to claim benefits, his monthly benefit could be as much as $4,873. Buffett’s net worth wouldn’t enable him to make this maximum benefit, but his earnings could.
How your Social Security check could be as big as Buffett’s
Most people won’t ever be worth billions of dollars like Buffett. However, it’s possible your Social Security check could be as big as his — or close to it. The SSA calculates your retirement benefits the same way it does Buffett’s.
To maximize your Social Security retirement benefit, you’ll first need to work 35 years in a job that’s eligible for Social Security benefits. You’ll also need to make the maximum taxable amount in each of those years. Even if you don’t make this maximum, the higher your earnings are, the higher your Social Security retirement benefit will be.
You’ll also want to wait to claim retirement benefits until you reach your full retirement age. To boost your benefits even more, hold off until you’re 70 to do so.
You might never be a billionaire like Warren Buffett. But you could potentially receive similar Social Security benefits.
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Keith Speights has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
Warren Buffett Is Worth $138 Billion. Here’s How Big His Social Security Check Likely Is. was originally published by The Motley Fool
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