How To Get A Social Security Card
Maximum Social Security Benefits
With the Social Security COLA of 8.7% for 2023, the new maximum Social Security numbers are going up next year. For those claiming benefits at age 62, the maximum Social Security benefit per month should be about $2,570. If you wait until your Full Retirement Age, your maximum Social Security benefit in 2023 will be about $3,636 per month. Waiting from 62 to full retirement age increases your amount by around 30% per month.
For those who are either patient, looking to get the maximum Social Security benefits, or perhaps, just working a bit longer, waiting until age 70 will result in the biggest possible Social Security benefit. The maximum Social Security benefit at age 70 will be about $4,559 per month. While earning almost $55,000 per year from Social Security may sound fantastic, if you qualify for the maximum Social Security benefit, this is likely only replacing a small portion of your pre-retirement income.
How are Social Security benefits calculated? What is the maximum Social Security benefit for 2023?
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What If Youreclose To The Maximum Social Security Benefit But Not Quite There
If you check your earnings history and find that you fellshort of the limit for a few years, dont despair. It may not even affect yourbenefit very much.
Since the Social Security formula is progressive, meaningmore credit is given for lower earnings and less credit given for earningswhich are approaching the maximum taxable earning limit, you can earn less than the maximum limit and stillreceive a benefit that very pretty close to the maximum.
Lets say your average earnings for 35 years amounted to 75%of the maximum limit. In this case, your benefit would equal 87% of themaximum.
If your earnings had been at 50% of the maximum taxableearnings amount, your benefit would still be 72% of the maximum benefit.
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Watch How Much You Earn In The Years Preceding Full Retirement
The SSA has imposed earning limits for individuals who have entered early and full retirement. Those limits, and the impact on your earnings, depend on how close you are to your full retirement age.
In 2022, an early retiree can make $19,560 in gross wages or net self employment earnings without penalty. Any overage will result in $1 deducted from the Social Security check for every $2 earned above this amount. Once you reach the year of your full retirement age, you can bring in $51,960 prior to the month of your full retirement birthday without penalty. For every $3 earned above this amount, the SSA will deduct $1 from your Social Security payment. These limits also affect the amounts family members can receive from your claim.
Once youve reached full retirement age, earnings do not impact your benefits.
How To Receive Federal Benefits
To begin receiving your federal benefits, like Social Security or veterans benefits, you must sign up for electronic payments with direct deposit.
If You Have a Bank or Credit Union Account:
- Call the Go Direct Helpline at .
If You Don’t have a Bank or Credit Union Account:
- Direct Express debit card – a pre-paid debit card. Get help by calling the Go Direct Helpline at .
Make Changes to an Existing Direct Deposit Account:
On Go Direct’s FAQ page, learn how to make changes to an existing direct deposit account. You also may contact the federal agency that pays your benefit for help with your enrollment.
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How Social Security Benefits Are Calculated
Qualifying for Social Security in the first place requires 40 work credits or approximately 10 years of work. To be eligible to receive the maximum benefit, you need to earn Social Securitys maximum taxable income for 35 years. The cap, which is the amount of earnings subject to Social Security tax, is $147,000 in 2022, up from $142,800 in 2021.
Social Security benefits are calculated by combining your 35 highest-paid years . First, all wages are indexed to account for inflation. Wages from previous years are multiplied by a factor based on the years when they were earned. This calculation gives an amount comparable to buying power based on the current value of the dollar. Accounting for this valuation change is important because a salary of $14,000, for example, was far more impressive in 1954 than it is today.
Once all wages have been indexed, your average indexed monthly earnings is computed by dividing the sum of all indexed wages by 420 . If you worked fewer than 35 years, a zero is entered for years when you did not work. The benefit amount is then calculated based on factors that include the year when collection begins, whether you have reached FRA, and whether you continue to work while collecting benefits.
Once you reach age 70, there is no reason to wait longer to start collectingyour benefit wont increase further.
What Is The Highest Social Security Payout
For 2021, the top Social Security payout was $3,895 per month. As youll see below, attaining this maximum benefit is not easy, and is based on a combination of your lifelong earnings record and your age when you claim your retirement benefit. The good news is that you have at least some control over these factors, meaning you have the ability to boost your future Social Security benefit.
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How Much Social Security Will I Get
SSA calculates your benefit based on the monthly average of up to 35 of your highest earning years rather than, say, your last five years. The earnings are indexed to the change in overall wage levels and the rise in the nation’s standard of living while you were employed. Your future benefits thus will reflect that rise.
A Social Security calculator can help you figure out your benefits.
When checking whether your earnings record is correct or not, keep in mind theres no statute of limitations on correcting errors related to wages, according to Kurt Czarnowski, a principal at Czarnowski Consulting.
A person needs to provide proof of what the correct amount of earnings was, Czarnowski said at a recent National Association of Personal Financial Advisors conference. But even if it’s something back in 1976, if happen to have W-2, can make that correction.
Delay or not?Should you hold off taking Social Security retirement benefits? Here’s what to consider
Also, be aware that someone who chooses to draw benefits at the earliest possible age 62 would see their payment reduced by as much as 30%. By contrast, workers who delay retirement past their full-retirement age 66 or 67 for most people would see an 8% increase in benefits for each year they wait until 70.
Social Security Benefits: Making Yours Grow
The $2,337 gap between average and maximum monthly Social Security benefits will mushroom into more than $908,000 if you invest it and earn a relatively modest 7% yearly rate of return for 16 years, according to calculator.net.
And 7% is fair. That’s much less than the broad market’s actual performance over the past 15 years. In that span, the S& P 500 has averaged annual returns of 10.3%, according to Morningstar Direct.
Why do we talk about investing your extra Social Security benefits for 16 years? That’s about the average American’s life expectancy once he or she reaches age 70. And age 70 is when you become eligible for your maximum starting Social Security benefits.
Of course, being able to invest the additional Social Security benefits depends on your not needing it for living expenses. That would be the case if you’ve invested wisely or have other sources of income, such as a traditional pension.
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How Will My Social Security Benefits Be Calculated
YourSocial Security benefits are based on your 35 highest-earning years of employment. There are a few adjustments made to account for inflation. If you have worked less than the requisite 35 years, you will likely see lower Social Security benefits in retirement.
The Social Security Administration calculated your Average Indexed Monthly Earnings or AIME to determine your final Social Benefits. The AIME is computed by dividing the sum of all your indexed wages by 420. Eventually, your actual Social Security benefit amount is calculated based on various factors, such as the age at which you start collecting benefits. Remember, the SSA will lower your benefits if you start taking them before full retirement age.
How Can I Get My Social Security Estimated Benefits?
Even if you are a long way from retiring, getting an estimate of your future Social Security benefits can be helpful. For those closer to full retirement age, you will likely want to check your Social Security benefits annually. You can register to view your official Social Security work history and estimated future Social Security benefits on the SSA site. Setting up an account is free.
Max Out Your Salary Over At Least 35 Years
Your benefit is based on the average indexed monthly earnings during the 35 years in which you earned the most.
To be eligible for the maximum Social Security benefit allowable, you must have consistently earned an amount that is equal to or exceeds the Social Security Administrations maximum taxable earnings limit throughout your career.
For 2021, the maximum limit is $142,800 per year, although the amount changes yearly to account for cost-of-living adjustments.
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Work For At Least 35 Years
The Social Security Administration calculates your final benefit amount based on your earnings for the 35 years when you made the most. It then indexes your annual earnings, which is to say it adjusts for inflation, and then takes the average of the 35 indexed amounts. If you have income for less than 35 years, the SSA will give you a zero for those years short of 35.
Thats why its important to have income for at least 35 years. Those zeroes can bring down your average significantly. The government used to send out peoples annual earnings histories, but stopped in 2011 to save money. Its a good idea, though, to check periodically what the government has recorded for you so you can make any needed corrections. You can do this easily by creating an online Social Security account.
Why The Adjustment Isnt A Perfect Solution To Seniors Rising Costs
Its not clear right now whether higher Social Security payments will contribute to spiraling inflation. But Arnone said that older people are much more likely to spend money than save it, giving his organization a clear sense that it will help mitigate a recession.
Every month this year, the cost of inflation has far exceeded the 5.9 percent cost-of-living increase that was set at the end of 2021, Johnson said. That means last years COLA is not meeting the current economic strains.
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Calculating Your Monthly Social Security Benefit
Can you calculate your own Social Security retirement benefit amount? Absolutely! Though the calculation is quite cumbersome, you can manually calculate how much your Social Security check will be when you start your benefits. First, you will need to calculate your average indexed monthly earnings or AIME. You do this by using your 35 years of highest income. If you worked fewer than 35 years, then your earnings will be considered zero for the years in which you did not work. Your earnings for each year are indexed to account for inflation. For example, if you made $65,000 in 2010, then that might be equivalent to $71,000 in todays dollars. Once your earnings are indexed, you will divide that by 420 to come up with your monthly average.
After getting the AIME amount, you will perform some adjustments based on cost-of-living adjustments and the timing of your benefits. Starting your benefits before full retirement age will decrease your benefits. Waiting until age 70 to claim Social Security retirement benefits will add more money to your Social Security payments. If you hear someone mention delayed retirement credits, this means that they are waiting past full retirement age to collect Social Security. The longer you wait, the more credits you have. You reach your maximum credits at age 70, so there is no need to wait past age 70 to start your benefits.
How Is Cola Calculated
The cost-of-living increase is purely a mathematical formula though it wasnt always that way, said National Academy of Social Insurance CEO William Arnone.
Social Security was established in the 1930s, but Congress first increased Social Security payments in 1950, and continued to do so every few years for more than two decades, according to the SSA. In 1972, President Richard Nixon signed a rule into law that the yearly increase be tied to consumer prices.
Since then, the Bureau of Labor Statistics compares the average consumer price index for workers for July, August and September of the current year to the average number for the previous year. That percent change then becomes the annual increase in Social Security payments, according to the Social Security Administration. COLAs cant be negative if theres a decrease in the percent change, there will be no COLA.
Inflation had already started to creep up by the end of 2020, which is why payments jumped 5.9 percent in 2021. As prices soared in 2022, a large cost-of-living adjustment was expected before it was confirmed Thursday.
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Fact #: Social Security Is Especially Beneficial For Women
Social Security is especially important for women, because they tend to earn less than men, take more time out of the paid workforce, live longer, accumulate less savings, and receive smaller pensions. Women represent more than half of Social Security beneficiaries in their 60s and 7 in 10 beneficiaries in their 90s. In addition, women make up 96 percent of Social Security survivor beneficiaries.
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What Is The Average Social Security Benefit At Age 70
Social Security was never meant to replace 100% of a workers income in retirement. However, among elderly Social Security beneficiaries, about 12% of men and 15% of women still rely on Social Security benefits for 90% or more of their income.
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Regardless of whether Social Security is your primary source of income or just a supplement to your personal savings, there are steps you can take to maximize your benefit. One of those is to defer claiming until age 70, which is the latest age you can file for benefits. Heres what the average Social Security payout is at age 70, along with a brief description of how benefits work.
How Does The Social Security Administration Calculate Benefits
Benefits also depend on how much money youâve earned in life. The Social Security Administration takes your highest-earning 35 years of covered wages and averages them, indexing for inflation. They give you a big fat âzeroâ for each year you donât have earnings, so people who worked for fewer than 35 years may see lower benefits.
The Social Security Administration also makes annual Cost of Living Adjustments, even as you collect benefits. That means the retirement income you collect from Social Security has built-in protection against inflation. For many people, Social Security is the only form of retirement income they have that is directly linked to inflation. Itâs a big perk that doesnât get a lot of attention.
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When To Start Your Social Security Benefits
You can start to collect Social Security benefits as early as age 62.
But, under today’s rules, if you wait until what the Social Security Administration calls your full retirement age , your benefits will jump by up to 30%.
Full retirement age increases gradually if you were born from 1955 to 1960, until it reaches 67. For anyone born 1960 or later, full retirement benefits are payable at age 67. You can find your full retirement age by birth year in the full retirement age chart.
But full retirement age is not the same as maximum retirement benefits age. That occurs once you reach age 70. Your monthly benefits grow between FRA and age 70.
For every year you delay claiming Social Security past your FRA up to age 70, you get an 8% increase in your benefit.
But your benefits won’t grow any more once you hit the big 7-0.
Follow Paul Katzeff on Twitter at @IBD_PKatzeff for tips about personal finance and active mutual fund managers who outperform the market by picking top-performing growth stocks.
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