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How To Calculate Your Estimated Social Security Benefit

Adjust For Retirement Age

How to Calculate Your Social Security Benefits

Your retirement income from Social Security is greatly affected by the time at which you decide to start your benefits. Starting your benefits immediately upon reaching full retirement age will allow you to receive 100% of your primary insurance amount. However, taking early retirement will reduce your benefits. Your monthly Social Security retirement benefits will be reduced by almost 1% for each month that you start early. For example, starting your benefits one year early will lead to about a 10% reduction in your payment amount.

Conversely, waiting past the full retirement age to start your benefits will lead to increased payments. You can accrue delayed retirement credits by waiting until later to start your benefits. Your monthly payment will increase by about 1% for each month that you wait. As soon as you reach 70 years old, your retirement benefit will max out, so there is no need to wait longer than this to start your benefits.

Are Social Security Benefits Taxable

If you have a lot of income from other sources, up to 85% of your Social Security benefits will be considered taxable income. If the combination of your Social Security benefits and other income is below $25,000, your benefits wonât be taxed at all. The amount of your benefits that is subject to taxes is calculated on a sliding scale based on your income. Money that Social Security recipients pay in income taxes on their benefits goes back into funding Social Security and Medicare.

If your retirement income is high enough that your benefits are taxable, how do you pay those benefits? You can ask Social Security for an IRS Voluntary Withholding Request Form if youâd like the government to withhold taxes from your Social Security benefits. Otherwise, youâre expected to file quarterly tax returns to pay these taxes over the course of the year.

That covers federal income taxes. What about state income taxes? That depends. In 12 states, your Social Security benefits will be taxed as income, either in whole or in part the remaining states do not tax Social Security income.

What Is Social Security Calculator

Social security calculator is a set of calculators that helps to calculate social security benefits according to your retirement age. It includes Retirement Age Calculator, Benefits Calculator, and Retirement Calculator.

For Every American worker, Social Security is part of the retirement plan, and Its essential to know how the system works and how much youll receive from the United state government as social security benefits when you retire.

SSN Calculator helps you to calculate your benefits according to your retirement age, types of benefits you are eligible for, full retirement benefits etc.

Also Check: Social Security Benefits Formula 2021

Why Retiring At 62 Is A Good Idea

Probably the biggest indicator that its really ok to retire early is that your debts are paid off, or theyre very close to it. Debt-free living, financial freedom, or whichever way you choose to refer it, means youve fulfilled all or most of your obligations, and youll be under much less strain in the years ahead.

Social Security Benefit Calculator

Social Security Benefits Calculator

Social Security benefits can be an important factor to consider in your future retirement income. Use this calculator to estimate what your retirement benefit amount could be.

An Ameriprise advisor can look at your overall financial picture and provide personalized advice to help you meet your retirement income goals.

Read Also: Social Security Percentage By Age

Read Also: Social Security Retirement Benefits For Non Citizens

What Is Social Security Tax

The Social Security program was established in 1935 to provide financial support for retired workers when they reach age 65. Benefits are financed by payroll taxes, which are split between employees and employers.

In 1939, the program broadened its focus to include survivors insurance, which supports the families of deceased workers. Over the following decades, Social Security added disability, health insurance and supplemental income benefits for low-income workers.

How Can I Get An Estimate Of My 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 Administrations 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 survivors 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, survivors, and disability benefits. It also includes other information about Social Security that may help you plan for retirement. If youre not registered for an online account and are not yet receiving benefits, youll receive a statement in the mail every five years, from age 25 to age 60, and then annually thereafter.

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Recommended Reading: Spousal Benefit Social Security Calculator

Benefits For Widows And Widowers

Widows and widowers are able to get Social Security benefits at age 60. If they are qualifying for disability, then benefits may begin at age 50.

They can take reduced benefits on one record and then switch to full benefits on another record later in Social Security.

From age 60 to 62, a woman can take a reduced widows benefit and then switch to her own full retirement benefit at full retirement age.

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A Couple Of Concernstaxes And Medicare Premiums

Fisher Investments Explains How to Estimate Your Social Security Benefit

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.

Recommended Reading: Social Security Widow Benefits Income Limits 2020

Fact #: Social Security Is More Than Just A Retirement Program It Also Provides Important Life Insurance And Disability Insurance Protection

Over 65 million people, or more than 1 in every 6 U.S. residents, collected Social Security benefits in January 2022. While older adults make up about 4 in 5 beneficiaries, another one-fifth of beneficiaries received Social Security Disability Insurance or were young survivors of deceased workers.

In addition to Social Securitys retirement benefits, workers earn life insurance and SSDI protection by making Social Security payroll tax contributions:

  • About 96 percent of people aged 20-49 who worked in jobs covered by Social Security in 2020 have earned life insurance protection through Social Security.
  • For a young worker with average earnings, a spouse, and two children, thats equivalent to a life insurance policy with a face value of nearly $800,000 in 2020, according to Social Securitys actuaries.
  • About 89 percent of people aged 21-64 who worked in covered employment in 2020 are insured through Social Security in case of severe disability.

The risk of disability or premature death is greater than many people realize. Some 7 percent of recent entrants to the labor force will die before reaching the full retirement age, and many more will become disabled.

Recommended Reading: Social Security Benefits Eligibility Age

How Long Can You Stay On Each Page

For security reasons, there are time limits for viewing each page. You will receive a warning if you dont do anything for 25 minutes, but you will be able to extend your time on the page.

After the third warning on a page, you must move to another page. If you do not, your time will run out and your work on that page will be lost.

Read Also: How To Calculate My Social Security Benefits When I Retire

Impact Of Inflation On Retirement Savings

Inflation is the general increase in prices and a fall in the purchasing power of money over time. The average inflation rate in the United States for the past 30 years has been around 2.6% per year, which means that the purchasing power of one dollar now is not only less than one dollar 30 years ago but less than 50 cents! Inflation is one of the reasons why people tend to underestimate how much they need to save for retirement.

Although inflation does have an impact on retirement savings, it is unpredictable and mostly out of a persons control. As a result, people generally do not center their retirement planning or investments around inflation and instead focus mainly on achieving as large and steady a total return on investment as possible. For people interested in mitigating inflation, there are investments in the U.S. that are specifically designed to counter inflation called Treasury Inflation-Protected Securities and similar investments in other countries that go by different names. Also, gold and other commodities are traditionally favored as protection against inflation, as are dividend-paying stocks as opposed to short-term bonds.

Our Retirement Calculator can help by considering inflation in several calculations. Please visit the Inflation Calculator for more information about inflation or to do calculations involving inflation.

Who Is Eligible To Collect Social Security Retirement Benefits

AARP

Workers who are at least age 62 and who have worked at least 10 combined years at jobs for which they paid Social Security taxes are eligible for Social Security retirement benefits. In many cases, spouses, widows and divorcees are eligible for Social Security retirement benefits based on a spouses or ex-spouses earnings history. Unmarried children 18 and younger can also get survivors benefits. You must be a U.S. citizen or lawful alien to collect benefits.

Recommended Reading: Medicare Benefit Policy Manual 2021

Will Your Expenses Decrease After You Retire

Retirement could be more expensive than you expect.

If youâre planning an active retirement or carry a mortgage or other debt, retirement may be more expensive than you expect. Some regular expenses like your out-of-pocket health care costs will likely increase as you get older. You can protect your retirement lifestyle by reducing your largest expenses. You can also increase your regular income by claiming at your full Social Security benefit age or later. If you claim earlier, your monthly benefit could be reduced by as much as 30 percent.Create a retirement budget.

Retirement could be more expensive than you expect.

If youâre planning an active retirement or carry a mortgage or other debt, retirement may be more expensive than you expect. Some regular expenses like your out-of-pocket health care costs will likely increase as you get older. You can protect your retirement lifestyle by reducing your largest expenses. You can also increase your regular income by claiming at your full Social Security benefit age or later. If you claim earlier, your monthly benefit could be reduced by as much as 30 percent.Create a retirement budget.

Maintain your lifestyle by planning ahead.

Maintain your lifestyle by planning ahead.

Many people find retirement is more expensive than expected.

Many people find retirement is more expensive than expected.

Three Ways To Reduce The Taxes That You Pay On Benefits

Is Social Security taxable? For most Americans, it is. That is, a majority of those who receive Social Security benefits pay income tax on up to half or even 85% of that money because their combined income from Social Security and other sources pushes them above the very low thresholds for taxes to kick in.

But there are three strategies you can useplace some retirement income in Roth IRAs, withdraw taxable income before retiring, or purchase an annuity, to limit the amount of tax you pay on Social Security benefits.

Read Also: Tax Benefits In Life Insurance

Easy Social Security Benefit Calculator

The calculation described above might seem overwhelming. Thankfully, there is a much easier way to estimate your benefit payments! There are several online calculators that allow you to calculate your benefit payment, but you need to feed lots of information into those systems. You need to provide your date of birth, retirement date, earnings history, and other information to get an accurate calculation.

However, the Social Security Administration has its own benefit estimator tools. Since the SSA already has access to all your personal information, you simply need to tell the tool when you plan to retire. Once you provide a date, the tool will give you an estimate of your monthly benefit payments. If you do not wish to create an account with the SSA, you can also use theirSocial Security quick calculator tool. You will need to enter your current earnings, date of birth, and retirement date into the tool. Remember that your future benefits could change if you change your retirement date, and they could also change based on future cost-of-living adjustments. The SSAs Social Security calculator tool is the quickest and easiest way to get an accurate retirement benefit estimate.

How Does The Calculator Estimate My Retirement Benefits Payment

SOCIAL SECURITY INCREASE 2023 : HOW TO CALCULATE SOCIAL SECURITY BENEFITS 8.7% INCREASE ?

Our simplified estimate is based on two main data points: your age and average earnings. Your retirement benefit is based on how much youve earned over your lifetime at jobs for which you paid Social Security taxes. Your monthly retirement benefit is based on your highest 35 years of salary history. You can get your earnings history from the Social Security Administration .

Your Social Security benefit also depends on how old you are when you take it. You can start collecting at age 62, the minimum retirement age, but youll get a bigger monthly payment if you wait until full retirement age, which is 66 but is gradually moving to 67 for people born in 1960 or after. If you can wait until 70 to start collecting, youll receive your maximum monthly benefit.

A single person born in 1960 who has averaged a $50,000 salary, for example, would get $1,349 a month by retiring at 62 the earliest to start collecting. The same person would get $1,927 by waiting until age 67, full retirement age. And he or she would get $2,389, the maximum benefit on those earnings, by waiting until age 70. Payments dont increase if you wait to collect past 70.

Other factors affecting the size of your benefit include whether youve worked for state or local government for more than 10 years your Social Security payment may be decreased if you paid into the civil service retirement program, for example.

Also Check: Why Are Medicare Benefits Based On Zip Code

Who Can Use The Retirement Estimator

You can use the Retirement Estimator if you have enough Social Security credits to qualify for benefits and you are not:

  • Currently receiving benefits on your own Social Security record.
  • Waiting for a decision about your application for benefits or Medicare.
  • Age 62 or older and receiving benefits on another Social Security record.
  • Eligible for a Pension Based on Work Not Covered By Social Security.

If you are currently receiving only Medicare benefits, you can still get an estimate. For more information, read our publication Retirement Information for Medicare Beneficiaries.

If you cannot use the Retirement Estimator or you want a survivors or disability benefit estimate, please use one of our other benefit calculators.

What Is Supplemental Security Income

SSI is a program administered by the Social Security Administration that provides monthly cash payments to low-income elderly or disabled individuals, including blind or disabled children. In addition, to be eligible for SSI the individual must have very few assets. For children on SSI, the Social Security Administration reduces the childs SSI benefit by two-thirds of the amount that is paid in child support.

Also Check: Spousal Benefits Social Security Disability

How Is Social Security Calculated

There is a three-step process used to calculate the amount of Social Security benefits you will receive.

Step 1: Use your earnings history to calculate your Average Indexed Monthly Earnings .Step 2: Use your AIME to calculate your primary insurance amount .Step 3: Use your PIA, and adjust it for the age when you will begin receiving benefits.

You can use a copy of your Social Security statement that provides your earnings history to plug your own numbers into the formulas below.

Social Security For Retirement

Social Security Tips

The biggest determinant of retirement benefit amount is lifetime earnings since the benefit is based largely on the average of a persons 35 highest-earning years. Because the SS tax is regressive, in retirement, lower-income earners will have a higher portion of their SS retirement benefits paid out in relation to their lifetime earnings than higher-income earners. Another important determinant of benefit amount is the age at which a person applies for retirement benefits.

SS is designed to replace about 40% of the average American workers pre-retirement income. This value is dependent on each individuals work history higher-income earners will receive larger SS checks than lower-income earners, but the check will be a smaller percentage of their pre-retirement income. SS is not intended to be a sole source of retirement income, and as such, it is advisable to have other forms of income in retirement. This can take the form of anything from rental property income to annuities, mutual funds, or even tax-shielded retirement plans such as a 401 and/or IRAs.

Full Retirement Age

When to Apply for Social Security Retirement Benefits

  • The immediate need for cash
  • Life expectancy
  • Relative age, income, and health of spouse

Social Security Credits

Receiving Retirement Benefits Outside of the U.S.

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