Social Security Benefits Retirement Calculator

How Social Security Benefits Work

Social Security Retirement Calculator

As mentioned above, your Social Security benefits are funded through payroll taxes. You typically pay about 6.2% of your paycheck into Social Security up to a taxable maximum income of \$147,000 for 2022. If youre self-employed, youll pay the entire 12.4% up to the maximum.

Although youll pay toward Social Security with every paycheck, your money isnt held for you. Instead, your taxes go into a pool to pay for people currently collecting benefits.

More than \$1 trillion was collected from payroll taxes for Social Security in 2020. The Social Security retirement benefit you will receive will primarily be paid for by people working when you start collecting.

Is There A Maximum Benefit

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, itÃ¢s \$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, youÃ¢ll need to have additional income from your own savings to supplement it.

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.

Also Check: At What Age Can You Collect Medicare Benefits

Income Tax Calculator: Estimate Your Taxes

Hi Richie, Once she takes her retirement benefit, your wife is eligible for her retirement benefit plus her excess spousal benefit. Her excess spousal benefit is half of your full retirement benefit less her retirement benefit with the difference reduced if she started her spousal benefit before full retirement age.

It sounds like her excess spousal benefit is negative, which they then set to zero. So unfortunately, it looks like you folks owe SSA three months of spousal benefits that you weren’t supposed to receive.

Sorry, for the bad news. But, you can run MaxiFi Planner. I’m sure you’ll find moves outside of Social Security that will more than make up for this loss. Best, Larry

Hi Larry, Is my wife’s benefit based on my PIA at FRA or is it based on the COLA increased amount if she applies two years later for spousal benefits on my record? I read online that my wife should receive a higher benefit based on the my current benefit with COLAs. But shouldn’t it be based solely on my PIA at FRA of 66 years and six months? Thanks, Matt

Hi Matt, I’ll give you an example to explain how it works. Let’s say Bill started drawing his benefits five years ago at his full retirement age . Bill’s PIA at that time was \$2,000, but his PIA has risen to a current amount of \$2,200 as a result of cost of living increases.

Will My Wife Get A Higher Payment Once I Retire?

Other Sources Of Retirement Income

Home Equity and Real Estate

For some people in certain scenarios, preexisting mortgages and ownership of real estate can be liquidated for disposable income during retirement through a reverse mortgage. A reverse mortgage is just as it is aptly named Ã¢ a reversing of a mortgage where at the end , ownership of the house is transferred to whoever bought the reverse mortgage. In other words, retirees are paid to live in their homes until a fixed point in the future, where ownership of the home is finally transferred.

Annuities

A common way to receive income in retirement is through the use of an annuity, which is a fixed sum of periodic cash flows typically distributed for the rest of an annuitant’s life. There are two types of annuities: immediate and deferred. Immediate annuities are upfront premiums paid which release payments from the principal starting as early as the next month. Deferred annuities are annuities with two phases. The first phase is the accumulation or deferral phase, during which a person contributes money to the account . The second phase is the distribution, or annuitization phase, during which a person will receive periodic payments until death. For more information, it may be worth checking out our Annuity Calculator or Annuity Payout Calculator to determine whether annuities could be a viable option for your retirement.

Passive Income

Inheritance

Recommended Reading: O’reilly Auto Parts Employee Benefits

How Much Money Do You Need For Retirement

Arriving at an answer to this question may not be immediately obvious because it depends on several variables related to your retirement objectives. Do you envision your retirement lifestyle costing more or less than what you spend now? If you want to increase the amount of domestic or international travel you enjoy during retirement, you will likely need additional money for these adventures. However, if you want to move into a smaller house or condo to simplify your life after you retire, you may not need as much money on an annual basis as you do now.

It can be helpful to imagine what your expected expenses in retirement might be and develop a retirement budget to estimate the level of income you think you’ll need. Remember to include unexpected costs like taking care of elderly parents, special destination weddings, inflation and potential investment losses. After you have a rough estimate of your retirement budget, you can more accurately determine the percentage of income replacement at retirement, one of the assumptions in our Retirement Savings Calculator. Depending on your situation, a scaled-down lifestyle may need only 80% of your current income, whereas opening an antique store as a brand new business venture could bump that up to 150%.

The States In Question

There are 12 states that currently tax Social Security benefits in some way:

North Dakota was on this list until recently, so congratulations to all the North Dakotans who are benefiting from the adjustments to the state’s tax code. Even if your state is listed above, you still might not owe any taxes on Social Security benefits. Many of them have deductions and income thresholds to protect seniors who are living on strict budgets.

Image source: Getty Images.

Don’t Miss: 529 Account Federal Tax Benefits

Compare Two Application Ages

Use the following calculation to compare the financial difference between two Social Security retirement benefit application ages. The U.S. Social Security website provides estimated benefit payment amounts of different claim ages.

The term “Social Security” is used in the U.S. to refer to the system that provides monetary assistance to people with inadequate or no income. The term can be better understood by thinking of it as the “financial security of society.” Although they may not go by the same name, there are many similar government systems in place throughout the world. This calculator is specifically intended for U.S. Social Security purposes.

Why It’s Smart To ‘plan Under Current Rules’

How to Calculate Your Social Security Benefits

It’s also important to remember the current depletion date projections are subject to change, as the Social Security trustees amend their projections each year.

Moreover, Congressional legislation could change the program’s funding status before that date. That may include higher taxes, benefit cuts or a combination of both. Washington Democrats have put forward proposals that call for raising taxes on the wealthy while making benefits more generous.

For his part, Elsasser doesn’t necessarily tell his clients to plan for a benefit cut, but it is important to gauge their potential impact.

“We advise them to plan under current rules, because in the past, there’s always been a compromise,” he said. “But then stress test the plan and say, ‘Are we OK if we do get a benefit cut? And if we do, what is our plan?'”

If the outcome is unacceptable, then it may be time to make changes like reducing spending, saving more or working longer to make sure you can weather those possible cuts, Elsasser said.

You May Like: How Much Is Social Security Spousal Benefit

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.

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.
• Also Check: Spousal Benefits From Social Security

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.

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.

Defining The Social Security Break

Your Social Security break-even age represents, in theory, the ideal point in time to apply for benefits in order to maximize them. Remember, you can begin taking your benefits at age 62 at a reduced amount. But by taking your benefits at this earlier age, youll receive more Social Security checks over your lifetime assuming you reach your desired life expectancy.

On the other hand, delaying your benefits past full retirement age increases them year over year until you reach age 70. Currently, the full retirement age for most people is either 66 or 67 years old, based on Social Security Administration guidelines. If you wait until age 70 to start claiming your benefits, youd receive 132% of your regular monthly benefit amount. So the trade-off is receiving fewer checks from Social Security but the ones you do get would be larger.

Your break-even age is the point at which youd come out ahead by delaying Social Security benefits. Your actual Social Security break-even age can depend on the number of benefits youre eligible to receive, your tax situation and things like how inflation might affect the purchasing power of your benefits.

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.

You May Like: Medicare Part C Benefits By Zip Code

Will Your Expenses Decrease After You Retire

Retirement could be more expensive than you expect.

If you’re 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 you’re 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.

How To Calculate The Impact Of A Benefit Cut

How Social Security benefits are calculated on a \$30,000 salary

Covisum, a provider of Social Security claiming software, recently updated its calculator to reflect the Social Security trustees’ latest projections. That includes a free version for consumers and a more complex paid version for financial advisors.

Another product, Maximize My Social Security, lets consumers evaluate which claiming strategy might best suit them for a \$40 annual fee. It also has a separate version for financial advisors.

The free Covisum calculator can help individuals do a quick calculation based on their benefits alone and some key facts year of birth, full retirement age benefit amount, percentage of the benefit cut and the year that benefit cut occurs.

So someone turning their full retirement age this year, for example, can calculate the effect of a 23% reduction in benefits starting in 2034, as well as the effect of no benefit cut.For each scenario, the calculator will show the value of claiming either at age 65 or age 70, and when beneficiaries stand to get the maximum amount possible from the program.As beneficiaries live longer, the value of waiting to claim until 70 goes up, as demonstrated in the difference in total benefits per the tool’s calculations.

To be sure, the free calculator is just a starting point when it comes to getting a sense of the trade-offs when claiming Social Security, according to Joe Elsasser, founder and president of Covisum.

Recommended Reading: When Can You Collect Medicare Benefits

Social Security In The Us

Before Social Security , care for the elderly or disabled in the U.S. wasn’t a federal responsibility if they weren’t cared for by family, it fell into the hands of municipalities or states. This changed in 1935 when the Social Security Act was first established in the U.S. by President Franklin Roosevelt. The first taxes were collected starting in January 1937, which enabled monetary assistance to qualified Americans with inadequate or no income. Originally, SS was just a program that paid out retirement benefits, but a 1939 change added survivors benefits for a retiree’s spouse and children. In addition, in 1956, disability benefits were added.

Today, SS in the U.S. plays a very important role in keeping a lot of older Americans out of poverty. For most Americans in retirement, it is their major source of income, and for a significant percentage, it is their only source of income, even though SS was never intended to be a full replacement of income. On average, SS pays lower-wage earners higher relative benefits than higher-wage earners. In addition, lower-wage earners tend to pay less tax and are more likely to receive social insurance disability income and survivor benefits. SS is sometimes referred to as Old Age, Survivors, and Disability Insurance .

Social Security Facts

More from Author

Next Steps For Apply...

Income Tax Calculator For Social Security Benefits

Ways To Avoid Taxes...

Social Security Benefits For Disability

When Will Disability Benefits...

Average Cost For Benefits Per Employee

The Cost Of Offering...

Next Steps For Apply For Ssdi Or Ssi Benefits How To Sign Up For My Social Security Account Online Evidence required by DDS for case documentation ...

How To Get Social Security Death Benefit

How To Apply For The Social Security Death Benefit After A Family Member Passes Away Social Security Lump Sum Death Benefit You can apply for the \$255 lump-sum payment...

Tax Benefits Of Incorporating In Delaware

Choose A Name For Your Llc eMinutes - What is the benefit of incorporating in Delaware? The first step to starting an LLC in Delaware is choosing a name....

Tax On Social Security Benefits 2022

When Are Children Eligible For Social Security Benefits Social Security benefits increasing in 2022 The Social Security Administration is probably best known for overseeing the federal governments retirement benefits...

Do You Pay Income Tax On Social Security Benefits

If You Have Other Income Is Social Security Taxable? A portion of your benefits may be taxable if you have other sources of income in addition to your Social...

United Health Care Employee Benefits

Discover Health Support Resources Services And More UnitedHealth Group Military Veterans Take advantage of UnitedHealthcares partnership with Peloton UHCs FEHB plans just added a great new...

Your Retirement Benefit: How It Is Figured

Myth #: You Must Claim Your Social Security Benefit At Age 62 Your Retirement Calculation Some people think you have to start claiming your Social Security benefits at age...

How Much Is Social Security Spousal Benefit

Find Your Social Security Full Retirement Age Social Security Spousal Benefits: The Complete Guide You can claim your Social Security benefits a few years before or after your full...

View My Social Security Benefits Online

Other Ways You Can Apply What is my Social Security? Apply With Your Local Office You can do most of your business with Social Security online. If...

How To File For Social Security Benefits

Factors That Affect Social Security Benefits How to apply for Social Security Number || Application Process || Documents Required #ssn #usa The math seems to say that everyone should...

Medicare Benefits And Eligibility Phone Number For Providers

Point And Click License For Use Of Current Dental Terminology Gareths Hair Transplant & Recycled Phone Number Drama End User License Agreement These materials contain Current Dental...

Edward Elmhurst Health Employee Benefits

Are You An Executive Hr Leader Or Brand Manager At Edward Hospital & Health Services Here, it's personal - Edward-Elmhurst Health Claiming and updating your company profile on Zippia...