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How Can I Estimate My Social Security Benefits

How Can I Get An Estimate Of My Social Security Benefits

How to Calculate Your Social Security Benefits

One way to get an estimate of your future Social Security benefits is to use the benefit calculators available on the Social Security Administration’s website, www.ssa.gov. You can estimate your retirement benefit based on your actual earnings record using the Retirement Estimator calculator, then create different scenarios based on current law that will illustrate how different earnings amounts and retirement ages will affect the benefit you receive. Other benefit calculators are also available that can help you estimate disability and survivor’s benefits. You can also sign up for amySocial Security account so that you can view your online Social Security Statement. Your statement contains a detailed record of your earnings, as well as estimates of retirement, survivor’s, and disability benefits. It also includes other information about Social Security that may help you plan for retirement. If you’re not registered for an online account and are not yet receiving benefits, you’ll receive a statement in the mail every five years, from age 25 to age 60, and then annually thereafter.

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Factors That Affect How Much You’ll Get In Retirement

Gordon Scott has been an active investor and technical analyst of securities, futures, forex, and penny stocks for 20+ years. He is a member of the Investopedia Financial Review Board and the co-author of Investing to Win. Gordon is a Chartered Market Technician . He is also a member of CMT Association.

Most retirees rely on Social Security. One in four gets 90% of their retirement income from the program. About half rely on it for 50% of their income.

Although Social Security is only one part of a secure retirement plan, it’s helpful to get a rough idea of how much you can expect. If you’re eligible for Social Security, your monthly benefit is based on two factors:

  • How much money you earned during your working career
  • The age you choose to start getting payments

Let’s look at how each of these affects your future Social Security income.

How To Estimate Your Social Security Income

Two facts are knownSocial Security benefits are not guaranteed, and some changes will be necessary to keep the system solvent in the future as millions of baby boomers retire and begin to receive their Social Security benefits. Though these facts create uncertainty, its also true that the quality of your retirement depends on your planningand you must start planning somewhere.

A good starting point is to figure out the dollar amount of the retirement benefits to which all of your years of Social Security contributions entitle you under current law. There are four ways to do this:

  • Visit a local Social Security office to get a record of your taxed Social Security earnings and an estimate of retirement benefits .
  • Visit the Social Security website and use one of its online benefit calculators to determine your retirement estimate based on your earnings record.
  • Wait until you decide to start receiving benefits, and let the SSA calculate the amount for you. However, this doesnt help you plan, and though the SSA can usually be counted on to determine benefits accurately, mistakes are sometimes made.
  • Calculate your own benefits using the step-by-step process described in this article. When you understand a few basic concepts, its not that difficult. One advantage of calculating your own benefits is that you can make decisions and consider trade-offs, such as whether you can afford to retire early or how much you can increase your benefits by continuing to work.
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    What About Spousal Benefits

    Social Security can also provide benefits based on a spouses earnings record. The amount can be as much as 50% of the spouses benefit. For example, say your spouse was the primary wage earner. Your Social Security benefits would then be based on your own work record or your spouses, whichever was the higher amount.

    Social Security benefits can also be paid based on a divorced spouses work record, and survivor benefits can be paid to widows, widowers, and dependents. The Social Security Administration provides more information on its website for divorced spouse benefits and survivors benefits.

    Is There A Maximum Benefit

    Taxable Social Security Calculator

    Yes, there is a limit to how much you can receive in Social Security benefits. The maximum Social Security benefit changes each year. For 2022, itâs $4,194/month for those who retire at age 70 . Multiply that by 12 to get $50,328 in maximum annual benefits. If that’s less than your anticipated annual expenses, youâll need to have additional income from your own savings to supplement it.

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    Follow These Steps To Get Started:

  • Ask your spouse to create or open their mySocial Security account, go to the Plan for Retirement section, and note their retirement benefit estimate at their full retirement age or Primary Insurance Amount .
  • Create or open your mySocial Security account, scroll to the Plan for Retirement section, and:
  • Select See what you could receive from a spouse if you are not eligible for retirement benefits yourself or select the Include a spouse? tab if you are eligible for retirement benefits.
  • Choose a future age or date when you would like to start receiving spouses benefits.
  • Enter your spouses retirement benefit estimate at their full retirement age or PIA.
  • If you are eligible for retirement benefits, you can also scroll to the bottom of the screen to estimate the potential benefits your spouse could receive based on your earnings history by entering their date of birth, and age when they would elect to begin receiving benefits.
  • Thats it! So create or sign in to your mySocial Security account and start planning for your future today!

    Already have a mySocial Security Account?

    Sign in to your account and scroll down to the Plan for Retirement section to start planning for your future.

    How To Create A My Social Security Account

    You can create your free My Social Security account at . You will need to:

    • Verify your identity by providing personal information and answering questions drawn from your credit report.

    • Create a username and password to access your account.

    • Confirm your email address and phone number.

    If you have a security freeze or fraud alert on your credit reports, you will need to temporarily lift it to create a My Social Security account. If you dont want to lift it, you can visit a local Social Security office to open the account in person.

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    How High Can Your Provisional Income Be Before Social Security Benefits Are Taxed

    Any income that falls below the threshold amount established by your filing status is not taxed. Federal income taxes are only due on amounts above the threshold. Depending on your tax filing status and the amount of provisional income above the threshold, up to 85% of your entire Social Security benefit may be taxed at the same rate as regular income.

    Your Retirement Age Can Significantly Affect Your Social Security Benefit

    How To Calculate Social Security Benefits [3 Easy Steps]

    You can start collecting Social Security benefits at age 62 or wait until your full retirement age , which is based on the year you were born. You can also postpone up to age 70.

    Why wait if you can collect benefits at 62? Because your decision affects how much you will receive for the rest of your life.

    Full retirement age is when you receive 100% of your benefit amount. If you claim benefits before that day, your monthly amount will be reduced permanently. Claim benefits after that day, and you will see an increase for each month you wait up to age 70.

    The Social Security benefits webpage shows the difference you could expect by claiming early and at FRA. For example, if you were born in 1960, your full retirement age would be age 67. If your benefit at age 67 would be $1,000, you would receive only $700 at age 62. By waiting until age 70, you would increase your benefit by 8% for each year you wait, or 24%, for a total of $1,240 monthly.

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    What Is Social Security

    Social Security is the most successful anti-poverty program in our countrys history, according to the SSA. President Franklin D. Roosevelt signed the Social Security Act into law in 1935 as a retirement program for workers. It was part of the historic New Deal, and the first lump-sum payments were made in 1937.

    Payments for workers survivors were added by Congress in 1939 and regular monthly checks started in 1940. Disability benefits were added in 1956.

    Todays workers pay Social Security taxes into the program, and the money is disbursed as monthly income to beneficiaries in a pay-as-you-go system, according to the National Academy of Social Insurance.

    One in five Americans receives benefits, including more than 47 million retired workers and dependents, 10 million disabled workers and dependents, and 6 million survivors of deceased workers.

    List Each Year’s Earnings

    Your earnings history is shown on your Social Security statement, which you can now obtain online.

    In the table below, sample earnings for a hypothetical worker born in 1953 are shown in Column C. Only earnings below a specified annual limit are included. This annual limit of included wages is called the “Contribution and Benefit Base” and is shown as Max Earnings in Column H in the table.

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    Why Do I Need To Know How To Calculate My Social Security Benefits

    So you may be thinking, Why do I need to know how to calculate my own Social Security benefits? After all, the SSA will give me an estimate at any time.

    Thats true! You can go to your My SSA account online and see an up-to-date copy of your benefits estimate. So why would you need to know how to do this calculation on your own?

    Its important for a few reasons.

    First, it never hurts to understand the mechanics behind an income stream thatll probably be a large part of your overall retirement income.

    Secondly, your benefits estimate from the Social Security Administration is probably wrong. This is because their estimation methodology has two serious flaws: 1) They assume your future earnings wont increase2) They use todays social security formula

    This means that these estimates are less accurate for younger workers but more reliable for workers who are close to retirement.

    So, understanding how to do this calculation is especially important if you plan to retire early or later than normal or if you have a significant earnings change in the last few years of working.

    To do this calculation, there are only four steps.

  • Adjust all earnings for inflation
  • Calculate your Average Indexed Monthly Earnings
  • Apply your AIME to the benefit formula to determine primary insurance amount
  • Adjust PIA for filing age
  • How To Estimate Your Social Security Benefits

    How to Access Your Social Security Benefits Statement

    There are a few tools you can use to calculate your Social Security benefits, including signing up for a my Social Security account.

    The best way to estimate your Social Security benefits is to sign up for a my Social Security account. The Social Security Administration used to mail benefit statements every five years to workers between the ages of 25 and 60 and then annually until they started taking benefits. But since 2011, the agency has cut back on mailing statements. It now only sends paper statements to workers who are at least 60 years old and have not yet signed up for a my Social Security account. The statements are sent about three months before your birthday.

    For those who have an account, you will receive an email about three months before your birthday reminding you to review your online statement.

    The benefit estimate provided in the statement is based on your past earnings and a projection of your future income, which assumes your income will remain at the same level as the previous year until you retire. You could get more than the estimate if you end up earning more in the future or less if your income drops. The statement provides an estimate if you continue working until age 62, your full retirement age and age 70.

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    Average Social Security Payment

    According to the Social Security Administration , the average estimated monthly Social Security payment in 2022 after the 5.9 percent cost-of-living increase is*:

    Retiree type
    Aged couple, both receiving benefits $2,753
    Widowed mother and two children $3,187
    Disabled worker, spouse and one or more children $2,383

    *Data for this table is based on the 2022 Social Security Fact Sheet2

    How To Calculate A Social Securitys Spousal Benefit

    If youre married to someone who works outside the home and contributes to Social Security through payroll tax, you might be entitled to a Social Security benefit based upon your partners income.

    The maximum amount you will receive is 50% of their Primary Insurance Amount — this is the monthly income they are eligible to receive at full retirement age . However, you will only receive 50% of this amount if you postpone filing until you are full retirement age- currently 66.

    If you file for a spousal benefit before age 66, the percentage you receive depends upon your age. Theres a two-stage process as to how Social Security calculates the reduction and it’s based upon how many months ahead of your FRA you are filing:

    For the first 36 months before age 66 that you apply for a spousal benefit, your check is reduced by 25/36 of one percent. For each additional month that you file early, the reduction is 5/12 of one percent.

    The following example illustrates how this applies. It assumes that your full retirement age is 66 and your partners PIA is $2,000/month.

    Theres a calculator on the Social Security website that allows you to enter your information to find out how your spousal benefit will be affected if you file prior to your full retirement age.

    Here are some other things you need to be aware of when claiming spousal benefits:

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    Primary Insurance Amount Calculation

    For 2022, the SSA established the first bend point as $1,024 and the second bend point as $6,172. Using the AIME from the earlier example of $10,141 and the bend points, we can calculate the primary insurance amount .

    Below are the steps to calculating the PIA:

    • Multiply the first $1,024 of the person’s AIME by 90% = $921.60
    • Subtract the 1st and 2nd bend point and multiply that difference by 32% = $5,148*.32 = $1,647.35*
    • Subtract the 2nd bend point amount from the total AIME amount and multiply the difference by 15%. = $3,969*.15 = $595.35

    *Please note that the calculation results are required to be rounded down to the next lower multiple of 10 cents.

    • The PIA is the sum of the three calculation results: = $3,164.30

    *The multipliers90%, 32%, and 15%are set by law and do not change annually. The bend points are inflation-indexed but only through age 62. PIA is effectively locked in at age 62.

    When Should I Start Collecting Social Security

    You should regularly check the estimated Social Security benefit youll eventually get

    Ultimately, the decision of when to begin collecting Social Security is one you have to make. It depends on your age, your health status, how much you spend and how much you have saved. Its generally best to start collecting as late as you can, because you get a larger monthly payment, which is adjusted for inflation each year.

    Consider a retiree who was born in 1950 and averaged $50,000 a year in salary. If she has $3,000 a month in expenses, her Social Security check would cover 48 percent of her expenses if she started Social Security at age 62. If she waited till age 70, her check would cover 85 percent of her expenses. Every year she delays retirement, her Social Security payout which is adjusted annually for inflation rises by about $1,649.

    Traditionally, the retirement system in the U.S. has been a three-legged stool: Social Security, savings and pensions. Social Security was never intended to be the sole source of income for retirement. Increasingly, however, employers have been moving away from their employer-sponsored pension plans in favor of tax-deferred retirement savings accounts, such as 401 plans.

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    Maximum Social Security Benefits You Can Get

    The maximum monthly Social Security benefit available to someone retiring in 2021 is $3,895, which assumes that:

    • They worked 35 years or more
    • In their 35 top-earning years, their income met or exceeded the SSA’s maximum taxable amount, so that they paid the largest Social Security tax amount possible for each of those years
    • They are retiring at age 70, which entitles them to the maximum delayed retirement credit

    For comparison, the table below lists the monthly benefits for workers who plan to retire in 2021 whose earnings met or exceeded the SSA maximum-taxable limit every year of their working lives, from age 22. This situation is far from typical, but it shows the impact of retirement age on Social Security benefits, isolated from other factors.

    Maximum Social Security Benefit for Workers Retiring in 2021
    Age

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