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How To Calculate My Retirement Benefits

Do You Expect To Live A Long Life

Your Retirement Calculation

Many people live longer than they expect.

Because Social Security provides guaranteed income for life, its especially valuable to you when you reach age 80 and beyond. Claiming benefits at your full Social Security benefit age or later could be a good way to secure your monthly income during your later years. Your benefit increases the longer you wait to claim, up to age 70, and is adjusted annually with the cost of living. If you live into your 80s but claim at age 62 instead of your full retirement age or later, your total lifetime benefits will be lower by thousands of dollars.Calculate your expected longevity.

Claiming at your full benefit age could still make sense for you.

We understand its difficult to make predictions. You may want to plan for the possibility that you may spend 20 or more years in retirement. On average, a woman reaching age 65 today will live to age 87, and a man will live to age 84. Waiting to claim as long as you can could still make sense for you if you are married, are the higher earner in the household, and want your surviving spouse to keep the highest monthly benefit after you die. Remember, you can claim at any point between age 62 and 70. Each additional month that you wait to claim gives you a permanent increase in your monthly benefit which becomes more valuable as you age.Calculate your longevity.

Theres a good chance that youll live into your 80s and beyond.

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To Find Out If Their Benefits Are Taxable Taxpayers Should:

  • Take one half of the Social Security money they collected during the year and add it to their other income.

Other income includes pensions, wages, interest, dividends and capital gains.

  • If they are single and that total comes to more than $25,000, then part of their Social Security benefits may be taxable.
  • If they are married filing jointly, they should take half of their Social Security, plus half of their spouseâs Social Security, and add that to all their combined income. If that total is more than $32,000, then part of their Social Security may be taxable.

Retirees In These 12 States Risk Losing Some Of Their Social Security Checks

Many, if not most, people would agree that Social Security benefits are not enough to live on. After all, benefits only deliver an average of about 40% of pre-retirement income for medium earners and about 27% for maximum earners. The average monthly Social Security benefit was recently just about $1,666 â roughly $20,000 per year.

The news is a little worse than that, though â because if you live in one of 12 states, your state may tax your Social Security benefits, leaving you with even less.

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Internal Revenue Code Limits

Internal Revenue Code regulations place a limit on the amount of pension benefits you can receive. Under IRC Section 415, you generally may not receive more than $230,000 annually and the amount is adjusted based on your retirement age. Some safety members are not impacted by the adjusted limits of IRC Section 415. MCERA will notify you at the time of your retirement if your benefit is affected by the IRC limit.

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

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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.

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State Taxes On Social Security

Twelve states tax Social Security benefits in some cases. Check with your state tax agency if you live in one of these statesColorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, or West Virginia. As with the federal tax, how these agencies tax Social Security varies by income and other criteria.

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Four Ways Benefits Can Be Increased Or Decreased

There are four ways the starting benefit can be permanently increased or reduced from the PIA calculated at age 62:

  • Starting benefits earlyBenefits may begin as soon as age 62, but they are permanently reduced for every month between the onset of benefits and FRA.
  • Delaying benefits beyond full retirement ageDelayed retirement credits can permanently increase benefits, and they are awarded for every month between FRA and a later onset of benefits.
  • Starting early and continuing to workIf you start benefits before your FRA and keep working, the SSA may deduct the part of your benefits that exceeds a threshold. However, any such deductions are not permanent. When you reach your FRA, the SSA recalculates your benefits and credits back any deductions.
  • Continuing to work, periodEven if you dont start benefits early, you can increase your benefits by continuing to work up to any age. Any year in which your indexed earnings are higher than one of your 35 previous highest years will boost your benefits. However, after age 60, you will not receive wage indexing, and after age 62, you will not receive bend point inflation indexing.

All four points are related to your starting Social Security benefits. Keep in mind that when your benefits start, the COLA will increase them annually. If you start benefits at age 66, your PIA automatically increases with the applicable COLAs from the years in which you turn 63 through 66.

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A Family Maximum Benefit Applies

Your family may receive benefits based on your earnings record. There is, however, a limit to the amount of monthly benefit that can be based on an individuals Social Security record. The limit varies but generally ranges from 150 to 180 percent of your PIA. Benefits to family members may be reduced if they exceed the family maximum. The formula used to compute the family maximum is similar to that used to compute the PIA.

Asset allocation and diversification are methods used to help manage investment risk they do not guarantee a profit or protect against investment loss.Note: Investors should consider the investment objectives, risks, charges and expenses associated with 529 plans carefully before investing. More information about 529 plans is available in the issuers official statement, which should be read carefully before investing. Also, before investing, consider whether your state offers a 529 plan that provides residents with favorable state tax benefits. As with other investments, there are generally fees and expenses associated with participation in a 529 savings plan. There is also the risk that the investments may lose money or not perform well enough to cover college costs as anticipated.

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Is Social Security Taxable

Your Retirement Estimate and Payment Options

It depends on your income. Youll be taxed on up to 50% of your benefits if your income is $25,000 to $34,000 for an individual, or $32,000 to $44,000 for married couples filing jointly, according to AARP. Up to 85% of your benefits are taxable if your income is more than $34,000 for an individual or $44,000 for a married couple.

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Eligible Family Members Include:

  • Ex-spouses, if the marriage lasted for at least 10 years and they have not remarried
  • Children under 18, or up to 19 if still enrolled in high school
  • Children of any age who were disabled before 22 that is, not earning more than $1,260 per month in 2020, having a medical condition that results in severe functional limitations and that is expected to last 12 months or longer or result in death

Spouses and ex-spouses must be at least 62 in order to claim benefits, and spouses and children must wait for the worker to begin claiming benefits themselves before they can claim family benefits on their record.

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What Does Aarps Social Security Calculator Do

The calculator provides an estimate of your Social Security benefits, based on your earnings history and age. Our tool also helps you see what percentage of daily expenses your payments can cover, and how you can increase your benefits by waiting to collect. It can also tell you how your retirement earnings will be affected if you keep working after you claim your Social Security benefit.

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Using This Retirement Calculator

When calculating your retirement balance, the calculator considers the compounded growth of your current savings as well as your future savings. For the purpose of this calculator, we assume that annual contributions are made into a savings account, which compounds annually.

Further, we assume that your annual savings contribution grows at 2% annually. Your current savings would be compounded annually for the remaining period until your age of retirement.

For example, imagine that your current savings account has $1,000 growing at a rate of 6% annually. In 2022, if you are 25 years old and are expected to retire at 65 years old, this implies that your savings would grow over a period of 40 years. At the end of the 40 years, the initial deposit of $1,000 would have grown up to $10,285.

Similarly, your annual future contributions too would grow over the remaining years until retirement. For example, if a contribution of $500 was made while you were 26 years old, it would grow for 39 years and would have grown to be $4,850 at retirement.

The contribution of $500 made the following year would grow for 38 years and would have grown to be $4,577 at retirement. Finally, the balance at retirement would be the total of all such contributions along with the growth of the initial deposit.

How Are Social Security Benefits Taxed

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Social Security benefits”including retirement, survivors and disability benefits”may be taxable. The amount of taxes youll pay depends on your income and filing status. The IRS can collect taxes on up to 85% of a persons benefits, though not everyone pays the tax.

To determine whether your benefits are taxable, youll need to do some math and know how much you receive from Social Security and what you pull in from other income sources.

To start:

  • Confirm your tax filing status.
  • Add up the Social Security benefits you received during the year.
  • Calculate 50% of those benefits.
  • Tally all of your other income, including wages, pensions, interest, dividends and capital gains.
  • Add that total to the half portion of your Social Security benefits.

For instance, say you received $24,000 during the year from Social Security, $11,000 from a part-time job and $1,000 from investment income. Your filing status is single. Your calculations would look like this:

  • Half of your Social Security benefits: $24,000 x 50% = $12,000
  • Your other income: $11,000 + $1,000 = $12,000
  • Your adjusted income: $12,000 + $12,000 = $24,000

Next, take that adjusted income and compare it to the current thresholds that can make Social Security benefits taxable. If your adjusted income exceeds the amount for your filing status, then part of your benefits may be taxable.

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How Much Is The Minimum Retirement Age

If you have 10 or more years of service and retire at the Minimum Retirement Age , your benefit will be reduced by 5/12 of 1% for each full month that you were under age 62 on the date your annuity began. However, your annuity will not be reduced if you complete at least 30 years of service, or if you complete at least 20 years of service and your annuity begins when you reach age 60.

Estimating Your Retirement Benefits

After watching the video below, cursor down to find more information.

Your lifetime monthly benefit will be based on a defined benefit formula. That defined benefit formula is an accrual factor , multiplied by average final compensation, multiplied by your years and months of creditable service — this produces the maximum annual allowance. Divide this total by 12 to get the maximum payment option. Keep in mind that reduction factors will be applied for early retirements. See the definitions section for explanations for AFC, accrual rate, creditable service and early retirement factors. The example below walks you through calculating a member’s benefit.

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A Couple Of Concernstaxes And Medicare Premiums

This all sounds like good news so far, but you should also be aware that continuing to work past 70 could cost you a bit more in taxes and Medicare premiums.

  • Required Minimum Distributions increase your taxable incomeIf you have traditional retirement accounts, you must take an RMD at age 70½ or 72 depending on your birthday. This is considered ordinary income and could possibly push you into a higher tax bracket, especially as you continue to earn other taxable income. Not only would that possibly increase your income tax bill, youd also most likely have to pay taxes on your Social Security benefits as I describe next.
  • Increased income may make your Social Security benefits taxableThe percentage of your Social Security benefits subject to income tax will depend on your annual income. Currently, if youre a single filer and make $25,000 to $34,000, up to 50 percent of your benefits may be taxed for income over $34,000, up to 85 percent of benefits may be taxed. Current limits for married filing jointly are $32,000 to $44,000 and over $44,000 respectively.
  • Higher income might mean higher Medicare Part B and D premiumsSimilarly, you may be charged more for Medicare premiums if you earn over a certain amount. For 2022 those thresholds are $91,000 for single filers and $182,000 for married filing jointly. However, if you still have healthcare coverage through an employer, you may be able to delay taking Part B and possibly Part D.

Do You Plan To Continue Working In Your 60s

How to Calculate Your Social Security Benefits

Working in your 60s will help you maximize your income and savings.

Your benefits are based on your highest 35 years of earnings. Each year of work can add higher earnings to your record by replacing years with low earnings such as those when you were a student, were unemployed, or took time off to care for someone. When you work and wait to claim until age 70, you can increase your monthly benefit by more than 75 percent! Working in your 60s also gives you more time to save on your own for retirement.Review your earnings record on my SocialSecurity.

Working in your 60s will help you maximize your income and savings.

Your benefits are based on your highest 35 years of earnings. Each year of work can add higher earnings to your record by replacing years with low earnings such as those when you were a student, were unemployed, or took time off to care for someone. When you work and wait to claim until age 70, you can increase your monthly benefit by more than 75 percent! Working in your 60s also gives you more time to save on your own for retirement.Review your earnings record on my SocialSecurity.

You can maximize your benefits even if you work fewer hours or stop working.

You can maximize your benefits even if you work fewer hours or stop working.

Consider working in your 60s for an extra boost to your income and savings.

Consider working extra years in your 60s for an extra boost to your income and savings

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When To Apply For Benefits How Much Youll Get

AARP, Updated May 25 , 2022

All the information presented is for educational and resource purposes only. It is not intended to provide specific or investment advice. We don’t guarantee the accuracy of the tool and suggest that you consult with your advisor regarding your individual situation.

How To Calculate Your Social Security Benefit Taxes

Just because you could owe taxes on up to 50% or 85% of your Social Security benefits doesnt mean youll actually owe taxes on that amount. If you fall into the 50% taxation range, the government says you should owe taxes on the lesser of half of your Social Security benefits or half of the difference between your combined income and the taxation threshold set by the IRS for your tax filing status.

Examples make this easier to understand, so lets consider an individual who receives $12,000 in Social Security benefits annually and has a combined income of $30,000. Youd calculate the amount theyd owe taxes on this way:

  • Divide their Social Security benefits in half to get $6,000.
  • Subtract the 50% taxation threshold for the individuals tax filing status from their combined income to get $5,000.
  • Divide your result from Step 2 in half to get $2,500.
  • The individual would owe taxes on the lesser of the result from Step 1 or the result from Step 3, in this case: $2,500.
  • Things get even more complicated if you fall into the 85% taxation range. If our individual had a combined income of $40,000 instead and still received $12,000 in annual Social Security benefits, you would calculate how much they would owe in taxes this way:

  • Divide their Social Security benefits in half to get $6,000.
  • Subtract the 50% taxation threshold for the individuals tax filing status from their combined income to get $15,000.
  • Subtract the result in Step 3 from the result in Step 2 to get $6,000.
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    Social Security Information You Can See Online

    When you sign in to your online account, you’ll be able to view your Social Security statements. If you don’t yet receive benefits, you’ll see an estimate of the amount you could receive when you do retire.

    There’s a table that shows your monthly benefit amounts if you retire — for instance, if you were born in 1960 or later, your chart may show retirement at 62 years old , 67 years old and 70 years old . Note that these retirement ages may change in the future. The longer you wait to retire, the more money you could receive per month.

    You can also see your eligibility and earnings information. If you’ve worked at least 10 years, you’ll have enough work credits — you need 40 — to receive benefits. If you click on Review your Earnings Record, you’ll see your taxed Social Security and Medicare earnings for each year you worked.

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