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How To Estimate Social Security Benefits At Retirement

How Much To Save For Retirement

How Social Security Retirement Benefits Are Calculated [3 Easy Steps]

Naturally, the next question becomes: how much should a person save for retirement? Simply put, its an extremely loaded question with very few definite answers. Similar to the answer to the question of whether to retire or not, it will depend on each person, and factors such as how much income will be needed, entitlement for Social Security retirement benefits, health and life expectancy, personal preferences regarding inheritances, and many other things.

Below are some general guidelines.

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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 Correct An Error On Your Social Security Statement

If you have evidence of your covered earnings in the year or years for which you think Social Security has made an error, call Social Securitys helpline at 800-772-1213, Monday through Friday, from 7 a.m. to 7 p.m. This is the line that takes all kinds of Social Security questions, and it is often swamped, so be patient. It is best to call early in the morning or late in the afternoon, late in the week, or late in the month. Have all your documents handy when you speak with a representative.

If you would rather speak with someone in person, call your local Social Security office and make an appointment to see someone there, or drop into the office during regular business hours. If you drop in, be prepared to wait, perhaps as long as an hour or two, before you get to see a representative. Bring with you two copies of your benefits statement and the evidence that supports your claim of higher income. That way, you can leave one copy with the Social Security worker. Write down the name of the person with whom you speak so that you can reach the same person when you follow up.

The process to correct errors is slow. It may take several months to have the changes made in your record. After Social Security confirms that it has corrected your record, request another benefits statement to make sure the correct information made it to your file.

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What Income Reduces Social Security Benefits

If you start taking Social Security benefits before you reach full retirement age, any income you earn over the annual limit until you reach full retirement age will lower your benefit eligibility for that year. In 2021, if you are retired and haven’t reached full retirement age, the SSA will deduct $1 from your benefits for every $2 earned over $18,960. In the year you reach full retirement age, the SSA will deduct $1 for every $3 earned over $50,520. For the 2022 tax year, these thresholds are slightly higher, at $19,560 and $51,960, respectively.

How To Get A Copy Of Your Social Security Statement

Social Security Breakpoints

The SSA mails out Social Security Statements to follks age 25 and over before their birthdays during their 25, 30, 35, 40, 45, 50, 55, and 60 years. For those age 60 until retirement, the SSA will send out statements every year. You can also go online to get a copy of your statement or view it online. Go to www.ssa.gov/mystatement/ and open an account with Social Security to view your statement.

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Benefit Reduction If Taken Before Full Retirement Age

When calculating benefits for early retirement, there are one or two calculations, depending on how early benefits are taken. Assuming a normal retirement age of 67, the age of 62 is the earliest year a person can receive benefits or 60 months early.

The benefit is reduced by 5/9 of 1% for each month before the normal retirement age , up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of 1% per month.

For example, let’s say that a person wants to retire at 62, leading to a 60-month reduction from the normal retirement age of 67. The first 36 months would be calculated as 36 months times 5/9 of 1% plus 24 months times 5/12 of 1%.

  • First 36 months: 5/9 = .5555 * 1% = .005555 * 36 months = .19999 or 20%*
  • Remaining 24 months: 5/12 = .416666 * 1% = .00416666 * 24 months = .0999 or 10%
  • In other words, benefits would be reduced by 30% if taken at age 62.

*The results were rounded and multiplied by 100 to create a percentage.

Use The Ssas Online Benefits Calculator

The SSA provides a variety of calculators to help you plan for all of the unique situations that come with retirement. Each of these calculators is connected to the mySocialSecurity website, SSA.gov. When you establish login credentials for mySocialSecurity, all the information related to your Social Security deductions and benefits is easily accessible online. You can even get the same statements online that you can request from your local field office.

When you use the calculators on this website, youll receive accurate estimates based on the number of credits you have and the amount of money youve contributed towards Social Security. One calculator allows you to estimate your monthly retirement benefits at different retirement ages. If you dont want to create a mySocialSecurity account, you can use the sites Quick Calculator, but the results are less specific.

Because these estimates are based on your contributions from Social Security payroll deductions, the SSAs online benefits calculators are some of the most effective ways to estimate your retirement benefits. The highly variable factors in the calculations involve annual cost of living adjustments based on inflation and laws that could change before your retirement date.

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Retirement Calculator Dangers Revealed

In fact, your estimate for how much money you need to retire is only as accurate as the assumptions used to make that estimate. If your input assumption is wrong then your retirement estimate is wrong as well because its merely a mathematical projection of the chosen assumptions nothing more.

Dont be deluded by the apparent mathematical precision of a retirement calculator into believing the estimate provided is similarly accurate. It isnt.

Increasing Your Social Security Benefit Amount

How to Calculate Your Social Security Benefits

Although you can claim Social Security as early as age 62, your monthly benefits will be reduced on a sliding scale based on the year you were born, whereas the closer you get to full retirement age, the higher your monthly benefits will be. Waiting until age 70 will yield the maximum amount per month.

Social Security can also provide spousal benefits, where your spouse can receive 50% of your monthly benefit amount based on your full retirement age, though this amount would change based on whether you claim benefits before or after this age.

Spend some time looking at the benefit calculators and explanations on the SSAs site, and consider speaking with a financial advisor to incorporate Social Security into your overall retirement plan. As a fee-only financial planner in Roseville, CA, we can help you and your spouse figure out when to start claiming Social Security benefits based on your goals and personal circumstances.

Schedule a complimentary, 15-minute call with a fee-only financial advisor today to discuss your personal situation.

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How Are Social Security Payments Calculated

The SSA bases the Social Security entitlement on data gathered throughout your working life which is formed into an earnings record. This information is than used, with a three-part process, to calculate the size of payments:

Average Indexed Monthly Earnings The SSA uses your 35 best-paid years to calculate your AIME, which is essentially a snapshot of your historical earnings. The more you earn the higher your monthly entitlement can be, up to a maximum threshold of $142,800 .

Primary Insurance Amount Assuming that you wait until full retirement age before claiming Social Security, your PIA is the amount youll receive each month from the SSA.

Your PIA is comprised of

  • 90% of the first $996 of your AIME
  • 32% of any amount over $996 up to $6,002
  • and 15% of any amount over $6,002

Age of claim If you decide to claim Social Security before you reach full retirement age the size of your monthly entitlement will decrease. This is done on a sliding scale, with more than a quarter of the payment size being lost if you claim at the age of 62. Alternatively, if you delay the payment until you are 70 you can add up to 30% to your payment amount.

Those who are considering early retirement should be aware that their Medicare benefits will not kick in until sixty-five, meaning that they will have to purchase insurance during the in-between period.

When You Choose To Start Taking Social Security Benefits

The yearâand even the month within that yearâthat you choose to begin taking Social Security benefits affects how much you receive each month. You can start claiming Social Security benefits early as age 62, the current early retirement age. But you wonât get your full PIA. Itâll be reduced based on how many months you have until your full retirement age. This reduction can really add up, topping in at as high as 30% for particularly early claimers.

You can avoid these surcharges on your PIA, of course, simply by waiting to start payments until your full retirement age. This is generally between ages 66 and 67, depending on when you were born.

You can even add onto your base amount by delaying when you start benefits. After you reach full retirement age, you can boost your benefits by up to 8% of your PIA annually simply by not claiming Social Security. These benefit increases are known as delayed retirement credits, and you can accrue them up to age 70.

An important note: These benefit rate changes are performed to provide roughly the same cumulative benefit over a lifetime, assuming a roughly average lifespan. In other words, if you start Social Security earlier, youâll probably claim it for longer someone with the same lifespan who delayed payments would claim them for less time. To provide them the same total benefit, earlier payments must be smaller and later benefits have to be larger to catch up.

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Yps Retirement Calculator Reveals Your Path To Financial Freedom

Whether you are just graduating high school and beginning your adult life or are nearing the end of your work life and are ready for retirement, YP Investors retirement calculator will help you plan out your path to retirement. This calculator was made to help everyone think ahead in life and make plans to live happy and financially free in the future. It is never too late to start saving for retirement, starting at any point is always better than never starting. Good luck on your investments and we hope you are able to live financially free in the near future if you dont already!

Claiming Social Security Benefits At The Right Time Means More Money In Your Pocket Heres A Guide To Everything From Knowing Your Full Retirement Age To Taking Social Security Spousal Benefits

How To Calculate Social Security Retirement

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When youre years away from retirement, Social Security seems straightforward: Youll leave your job, file for benefits and receive a monthly check for the rest of your life boom! But in reality, getting the most out of Social Security is anything but simple. As you near retirement, the decisions you make could have a significant impact on the amount of money you receive, and some of these choices are irrevocable. Youll need to move carefully to maximize this income stream.

Here are 12 essential details you need to know.

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Can I Use The Calculator To Figure Out Social Security Disability Insurance And Supplemental Security Income

No. SSDI is aimed at people who cant work because they have a medical condition expected to last a year or more or result in death. Your SSDI benefits last only as long as you suffer from a significant medical impairment while not earning significant other income.

SSI is a separate program for people with little or no income or assets who are 65 or older, as well as for those of any age, including children, who are blind or who have disabilities. The maximum monthly SSI payment for 2022 is $841 for a single person and $1,261 for a couple. But some states add to that payment, and you may receive less than the maximum if you or your family has other income. Get more information about SSDI and SSI from the Social Security Administration.

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Beware The Social Security Earnings Test

Bringing in too much money in earned income can cost you if you continue to work after claiming Social Security benefits early. With what is commonly known as the Social Security earnings test for annual income, you will forfeit $1 in benefits for every $2 you make over the earnings limit, which in 2022 is $19,560. Once you are past full retirement age, the earnings test no longer applies, and you can make as much money as you want with no impact on benefits.

Any Social Security benefits forfeited to the earnings test are not lost forever. At your full retirement age, the Social Security Administration will recalculate your benefits to take into account benefits lost to the test. For example, if you claim benefits at 62 and over the next four years lose one full years worth of benefits to the earnings test, at a full retirement age of 66 your benefits will be recomputed and increased as if you had taken benefits three years early, instead of four. That basically means the lifetime reduction in benefits would be 20% rather than 25%.

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Theres A Social Security Spousal Benefit

Marriage is rewarded when it comes to Social Security. One spouse can take whats called a spousal benefit, worth up to 50% of the other spouses Social Security benefit. For example, if your monthly Social Security benefit is worth $2,000 but your spouses own benefit is only worth $500, your spouse can collect a spousal benefit worth $1,000 bringing in $500 more in income per month.

Just as the benefit based on your own work history is reduced if you claim it early, the same is true for a spousal benefit. That 50% figure is the maximum amount that only a spouse who is at least full retirement age is eligible for. Taking the spousal benefit early at, say, age 62, reduces the amount to as little as 32.5% of the higher earners benefit. If you take your own benefit early and then later switch to a spousal benefit, your spousal benefit will still be reduced.

Calculate How Much You Can Get From Social Security Years Before You Retire And Qualify

How Social Security benefits are calculated if you make $15 per hour

In the United States, those age 62 and older generally qualify to receive Social Security benefits, but depending on when you choose to start receiving those benefits will impact how much you get so its never too early to start planning ahead and start saving to supplement these future benefits, even if its seemingly far off.

Social Security currently replaces about 40% of an average workers pre-retirement earnings, according to the Social Security Administration, with most financial advisors saying that one will need 70 percent or more of pre-retirement earnings to live comfortably, it added.

The SSA added that Social Security was not designed to be the sole source of retirement income, but to supplement retirement savings in addition to other sources such as pensions.

The portion of your pre-retirement wages replaced by Social Security is based upon your highest 35 years of earnings varying depending on how much you earn over that period, the SSA added.

Eligibility for Social Security also is based on the number of credits you earn over the years you work and pay in Social Security taxes with most alive today needing 40 credits to qualify for retirement, according to the SSA.

The SSA recommended visiting its retirement benefits webpage to learn more information on how the Social Security Credits work.

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Social Security Benefit 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.

Your May Have To Pay Taxes On Social Security Benefits

Most people know that Social Security is funded by a tax on earnings, currently 6.2% for the employee . But some retirees dont realize that you may well have to pay income tax on Social Security benefits when it comes time to claim them. Benefits lost their tax-free status in 1984, and the income thresholds for triggering tax on benefits havent been increased since then.

It doesnt take a lot of income for your Social Security benefits to be taxed. Your benefits wont be taxed if your provisional income is less than $25,000 if youre single or $32,000 if youre married. If youre single and your provisional income is between $25,000 and $34,000, or married filing jointly with provisional income between $32,000 and $44,000, up to 50% of your Social Security benefits may be taxable. If your provisional income is more than $34,000 on a single return or $44,000 on a joint return, up to 85% of your benefits may be taxable.

The Social Security Administration says about 40% of beneficiaries pay taxes on their benefits. Since the thresholds arent adjusted for inflation, the number of beneficiaries who pay taxes on Social Security benefits increases every year. The Social Security Trustees annual report estimates that taxes on Social Security will total $45.1 billion in 2022, up from $34.5 billion in 2021.

You may also have to pay state income taxes on your Social Security benefits. See our list of the 12 States That Tax Social Security Benefits.

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