Tuesday, September 27, 2022

How Do I Calculate My Social Security Retirement

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How Social Security Works

How to Calculate Your Social Security Benefits

The Social Security Administration uses a multi-step formula to calculate just how much any given American gets in benefits. Factors include marriage, lifetime contributions, work history and more. But the purpose is always the same: to make sure that everyone who works has a safety net for retirement. To understand just how important that is we have to recall how senior citizens lived before President Franklin Roosevelts administration invented this program.

Although precise measurement hadnt yet begun, most estimates suggest that in 1934 approximately half of all seniors lived in poverty. Most estimates suggest that this figure would have changed little over the past 84 years without the Social Security program. Instead, by 1959 this figure had fallen to 35%. By the year 2000 only 1-in-10 seniors lived in poverty, a number that has stayed largely consistent to this day. In many very real ways, Social Security created the concept of retirement.

Of course, theres still far to go. Nearly a third of seniors still live within 200% of the poverty line, and many more still struggle to pay their bills.

What Happens To Railroad Retirement If I Die

Upon the death of a railroad employee, survivor benefits may become payable in the form of a monthly annuity or as a lump sum payment. Regardless of which agency has jurisdiction, the deceased employees railroad retirement and social security credits will be combined for the purpose of benefit computations.

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.

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.

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What Documents Do I Need To Submit

To apply for Social Security Benefit you need the following documents:

  • Your Social Security card or a record of your SSN
  • Your original birth certificate, a certified copy from the issuing agency, or another kind of proof of your age. Photocopies or notarized copies are NOT accepted.
  • If youre not U.S.-born you will need to have proof of lawful alien status or U.S. citizenship. Expired documents, notarized copies, or photocopies are not accepted.
  • If you served in the military before 1968, you need to provide a copy of your U. S. military service paper. You can submit a photocopy of this document.
  • Self-employment tax return for the previous year and/or a copy of your W-2 form . You can submit a photocopy of this document as well.

You can view the Social Security Checklist For Retirement, Medicare, and Spouses Application here.

If you have applied for Medicare or a Social Security claim, you should have already provided proof of age and/or citizenship. In this case, you may not need to submit proof of age or U.S. citizenship again.

It is recommended to apply for Social Security benefits as soon as you can. If you do not have all the above documents ready, you could still start the application process. Missing documents can be provided later.

If you delay applying for your benefits, you may lose out on receiving them.

Finally How Does The Stock Market Figure Into The Equation

Free Social Security Calculator Tool: Estimate Your ...

Generally speaking, the U.S. stock market has been on a record-setting run, but its ongoing performance is never a sure thing. What goes up can go down eventually, and a declining portfolio could have an impact on a retirees cash flow needs. If a retiree gets to a point where the declining value of their portfolio cannot sustain their cash flow requirements, then it would be an appropriate time to consider taking Social Security benefits earlier than previously planned.

Yes, deciding when to take Social Security is complicated, but its still a decision that is often integral to retirement planning. Its also a decision that many retirees seem to disregard. According to Employee Benefit Research Institutes 2018 Retirement Confidence Survey, only 23% of workers try to maximize their benefits by planning when to claim Social Security.

So, once youve determined your break-even age, I encourage you to take the next steps: Consider your individual circumstances, get some guidance, and make a plan. It could make a difference of tens of thousands for you over the years.

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Children Can Collect Social Security Benefits Too

Minor children of Social Security beneficiaries can be eligible for benefits. Children up to age 18 and disabled children older than 18 may be able to receive up to half of a parent’s Social Security benefit. The disability must have occurred before the age of 22. As long as the disability prevents the person from working, the adult child can continue collecting the benefit even after the parent has died.

How Does Railroad Retirement Work

Like social security benefits, railroad retirement Tier I benefits and vested dual benefits paid to retired employees and their spouses are reduced if you are under FRA, work, and earn over a certain exempt amount. FRA extends from age 65 for beneficiaries born before 1938, to age 67 for those born in 1960 and later.

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What Does Aarps Social Security Benefits 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.

Simplifying Your Social Security Taxes

How To Calculate Social Security Benefits [3 Easy Steps]

During your working years, your employer probably withheld payroll taxes from your paycheck. If you make enough in retirement that you need to pay federal income tax, then you will also need to withhold taxes from your monthly income.

To withhold taxes from your Social Security benefits, you will need to fill out Form W-4V . The form only has only seven lines. You will need to enter your personal information and then choose how much to withhold from your benefits. The only withholding options are 7%, 10%, 12% or 22% of your monthly benefit. After you fill out the form, mail it to your closest Social Security Administration office or drop it off in person.

If you prefer to pay more exact withholding payments, you can choose to file estimated tax payments instead of having the SSA withhold taxes. Estimated payments are tax payments that you make each quarter on income that an employer is not required to withhold tax from. So if you ever earned income from self-employment, you may already be familiar with estimated payments.

In general, its easier for retirees to have the SSA withhold taxes. Estimated taxes are a bit more complicated and will simply require you to do more work throughout the year. However, you should make the decision based on your personal situation. At any time you can also switch strategies by asking the the SSA to stop withholding taxes.

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What Is Full Retirement Age

In addition to how much youve earned over the years, the size of your monthly Social Security benefit depends on when you were born and the age when you start claimingdown to the month.

Youll receive your full monthly benefit if you start claiming when you reach what Social Security considers your full retirement age , sometimes also referred to as normal retirement age. FRA was 65 when Social Security began, but it has been raised to 67 for anyone born in 1960 or later. To find your FRA, see the chart below.

Finding Your Full Retirement Age

Heres How To Estimate Your Social Security Benefit From Your Salary

Fortune tellers use crystal balls, tea leaves, and tarot cards to see the future. Thankfully, you dont have to resort to psychic tools and mystical arts to predict your Social Security benefit. The Social Security Administration opts for a more concrete approach, in the form of online calculators and other estimators.

In 2020, the average Social Security benefit is $1,503 monthly and the maximum benefit is $3,790. A six-figure salary translates into a benefit thats between those two numbers but where the benefit lands, exactly, is influenced by other factors beyond your current income. Your income in prior years, your age today, and the timing of your benefits claim are also important. If youre willing to make some assumptions, it is possible to estimate your future monthly Social Security benefit.

Social Security benefits are a substantial source of income for many retirees. However, the average benefit amount is just over $1,500 per month, or around $18,000 per year, according to the Social Security Administration.

Considering $18,000 per year is barely above the federal poverty line, the average retiree wont be able to survive on Social Security benefits alone.

One solution is to boost your retirement savings to supplement your income during your senior years. Another option, though, is to increase your Social Security benefits.

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When Does Cola 2022 Take Effect In Social Security Benefits How To Calculate Your Amount

Social Security recipients have seen the purchasing power of their monthly benefits eroded over the past few decades, especially with exceptionally high inflation in 2021. Relief, to some degree, is on its way after the Social Security Administration announced on 13 October that in 2022 those receiving benefits from the agency, including Social Security, Supplemental Security Income, and more, would see a 5.9 percent increase reflected in their check.

Next Steps To Consider

9 Facts About Social Security  Beirne Wealth Consulting ...

This information is intended to be educational and is not tailored to the investment needs of any specific investor.

Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. Fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.

Investing involves risk, including risk of loss.

Past performance is no guarantee of future results.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

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There Are Social Security Benefits For Surviving Spouses And Children

If your spouse dies before you, you can take a Social Security survivor benefit, but not in addition to your own benefit. You must choose one or the other. If you are at full retirement age, that benefit is worth 100% of what your spouse was receiving at the time of his or her death .

A widow or widower can start taking a survivor benefit at age 60, but the benefit will be reduced because it’s taken before full retirement age. If you remarry before age 60, you cannot get a survivor benefit. But if you remarry after age 60, you may be eligible to receive a survivor benefit based on your former spouse’s earnings record.

Eligible children who are under age 18 or were disabled before age 22 can also receive a Social Security survivor benefit, worth up to 75% of the deceased’s benefit.

How To Calculate Your Social Security Benefits: A Step

Its important for you to have a clear understanding of the process used to calculate your Social Security benefits. If you understand this calculation, you may be able to spot mistakes and fix them before its too late.

Like anything with Social Security, the rules can seem complex at first. But once you get under the surface, they are actually pretty easy to understand. To help you, I distilled the several pages of calculation rules down into four easy-to-understand steps.

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How Your Social Security Benefits Are Earned

To be eligible for Social Security benefits in retirement, you must earn at least 40 “credits” throughout your career. You can earn as many as four credits a year, so it takes 10 years of work to qualify for Social Security.

In 2021, you must earn $1,470 to get one Social Security work credit and $5,880 to get the maximum four credits for the year.

An Example Of Taxed Benefits

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

Lets say you receive the maximum Social Security benefit for a worker retiring at FRA in 2021: $3,148 per month. Your spouse receives half as much, or $1,574 a month. Together, you receive $4,722 a month, or $56,664 per year. Half of that, or $28,332, counts toward your combined income for determining whether you have to pay tax on part of your Social Security benefits. Lets further assume that you dont have any nontaxable interest, wages, or other income except for your traditional individual retirement accounts required minimum distribution of $10,000 for the year.

Your combined income would be $38,332half of your Social Security income, plus your IRA distributionwhich would make up to 50% of your Social Security benefits taxable, because youve exceeded the $32,000 threshold. Now, you may be thinking, 50% of $56,664 is $28,332, and Im in the 12% tax bracket, so the tax on my Social Security benefits will be $3,399.84.

Fortunately, the calculation takes other factors into account, and your tax would really be a mere $225. You can read all about the taxation of Social Security benefits in Internal Revenue Service Publication 915.

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Whats Your Full Retirement Age

Your benefit is calculated based on your full retirement age , according to the year you were born. Visit ssa.gov for more information about other factors that may affect your benefits.

65 if you were born before 1937

65+ if you were born between 1938 and 19421

66if you were born between 1943 and 1954

66+ if you were born between 1955 and 19592

67 if you were born after 1960

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How Do You Know How Much You Will Receive

To help each beneficiary know what amount to expect, monthly benefits should be calculated based on several circumstances.

The simplest way to calculate your benefit is to take your current monthly payment and then multiply it by 5.9%. That amount is added to the original payment and you will see the increase reflected in your check, according to MSN.

It’s important to keep in mind that only the 35 years with the highest earnings count toward your Social Security benefit. That’s why it’s important to work for at least 35 years, or else $0 will be factored into your benefit calculation for each year you are missing an income.

Security’s annual increase, or COLA, is determined each year by the Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W.

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How To Calculate Your Social Security Benefit

Calculating your estimated Social Security benefit is no easy task. Your best bet may be to request a Social Security benefits estimate from the SSA. This will contain an estimate of your benefit at age 62, at your FRA, and at age 70, based on your current work history.

In addition to these estimates, the SSA also has a series of Social Security benefits calculators that can help you plan for retirement. You can also use this calculator from AARP to estimate the best age to start claiming your benefits.

How Your Primary Insurance Amount Is Calculated

The Average Social Security Benefit Is Not Enough For ...

Once you have your AIME, you can calculate your primary insurance amount , the base rate for your Social Security payments. The PIA calculation relies on so-called bend points that determine how much of your income will be replaced by Social Security benefits in retirement.

Think of bend points as similar to tax brackets, in that they determine a percentage of your benefits based on incremental buckets of earnings. There are three bend point buckets: one for 90% of income replacement, one for 32% and one for 15%.

These bend point buckets help give lower lifetime earners a higher percentage of income replacement, and higher lifetime earners a lower rate of income replacement, says Jim Blankenship, certified financial planner and author of A Social Security Owners Manual.

The dollar amounts of bend points are adjusted for inflation each year, but the percentages of each bend point are set by law and remain unchanged. AIME amounts are always rounded down to the nearest $0.10. For 2021, the bend points are:

90% of the first $996 of your AIME, plus

32% of your AIME between $996 and $6,002, plus

15% of your AIME over $6,002

For a worker with an AIME of $6,250, the calculation would look like this:

90% of $966 = $896.40, plus

32% of $5,006 = $1,601.92, rounded down to $1,601.90, plus

15% of $248 = $37.20

This worker would earn a monthly Social Security benefit of $2,535.50 .

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