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Retirees across the U.S. are celebrating the largest Social Security increase in 41 years. But there are quite a few seniors benefiting from the “pay raise” who are still working. Warren Buffett is one of them.
Buffett turned 92 less than two months ago. He still serves as the chairman and CEO of Berkshire Hathaway , one of the biggest companies in the world, based on market cap.
Even though he’s a multibillionaire and still working, Buffett is eligible to receive a Social Security check every month like 66 million other Americans. How big will his check be after the monster cost-of-living adjustment (COLA)? We can make a pretty good guess.
Image source: The Motley Fool.
How Social Security benefits are calculated
The Social Security Administration (SSA) uses several factors to calculate benefits. The most important is income. In particular, SSA looks at a person’s average amount made per month over the 35 years with the highest earnings.
The process is a little more complicated than just computing the average monthly amount, though. SSA adjusts the earnings to account for the impact of inflation. This results in a number called the average indexed monthly earnings (AIME).
The age at which a person begins to claim Social Security benefits is also important. Benefits will be reduced if a person claims them before the full retirement age. Higher benefits will be paid if a person waits until age 70 to begin receiving monthly checks.
Also, there’s a catch if a person begins receiving Social Security benefits before the full retirement age yet continues to work. SSA will deduct $1 of benefits for every $2 earned above the annual limit (which is $19,560 in 2022). In the year the person reaches full retirement age, SSA will deduct $1 in benefits for every $3 earned above a different annual limit (which is $51,960 in 2022).
Making a few assumptions
So what will Buffett’s monthly Social Security check be after the 8.7% COLA goes into effect? We first must look at how much he’s made.
Berkshire Hathaway revealed in a regulatory filing in 1999 that Buffett had been paid $100,000 for the previous 18 years. It gets a little murky before then.
However, several people have stated that Buffett made $12,000 per year at age 24 when he worked for Benjamin Graham. That salary was almost three times the median U.S. family income in 1954. It’s probably a safe assumption that Buffett has made more than the amount needed to qualify for the maximum Social Security benefit throughout his career.
Buffett hasn’t said publicly when (or even if) he filed to receive Social Security benefits. Since he has continued to work, he likely wouldn’t have done so before his full retirement age of 65. And because he wouldn’t have really needed the additional money at that point, it wouldn’t be surprising if Buffett waited until age 70 to claim his Social Security benefits.
Granted, we have to make some assumptions here. Buffett paid Social Security taxes, so it stands to reason that he would have filed for benefits rather than forego benefits that he was due. Waiting until age 70 to claim Social Security also probably made sense for the legendary investor.
Buffett’s monthly Social Security check
If we assume that Buffett claimed his Social Security benefits at age 70 (in 2000) and received the maximum benefit, his monthly check at the time would have been $1,752. However, like all other Social Security recipients, Buffett would have received COLAs through the years. With the latest monster increase, Buffett’s monthly Social Security check beginning in January 2023 will be $3,120.
By the way, if you’re about to retire, it’s possible that you could make even more than Buffett does — at least from Social Security. The maximum monthly Social Security benefit for anyone retiring in 2023 will be $4,555.
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Keith Speights has positions in Berkshire Hathaway (B shares). The Motley Fool has positions in and recommends Berkshire Hathaway (B shares). The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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