Sunday, August 14, 2022

How Do I Estimate My Social Security Benefits

Don't Miss

We Hope To See You Again Soon

How to Calculate Your Social Security Benefits

Youre about to leave Regions to use an external site.

Regions provides links to other websites merely and strictly for your convenience. The site that you are entering is operated or controlled by a third party that is unaffiliated with Regions. Regions does not monitor the linked website and has no responsibility whatsoever for or control over the content, services or products provided on the linked website. The privacy policies and security at the linked website may differ from Regions privacy and security policies and procedures. You should consult privacy disclosures at the linked website for further information.

How Will My Retirement Benefits Be Taxed

Approximately one-third of people who collect Social Security benefits are required to pay income taxes on these benefits. Individuals with higher total incomes must include up to 85% of their benefits as income for federal income tax purposes, designated by special step-rate thresholds. However, the taxation thresholds for your benefits arent currently indexed for inflation.

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.
  • Recommended Reading: When Can You Take Out Social Security

    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 2021, itâs $3,895/month for those who retire at age 70 . Multiply that by 12 to get $46,740 in maximum annual benefits. If that’s less than your anticipated annual expenses, youâll need to have additional income from your own savings to supplement it.

    What Income Reduces Social Security Benefits

    Social Security Retirement 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: Search Person By Ssn

    At What Age Do You Stop Paying Taxes On Social Security

    The answer to this question will greatly vary depending on what your income continues to be even as you enter a later age. Normally, once you reach the age of 62 you are eligible to start collecting from your Social Security benefits, however, these benefits may continue to be taxed if you are depending on other sources of income. This means that if at a later age you are using your investments and other incomes to support your lifestyle you may be called to continue paying taxes on your social security benefits. If you do not have other large sources of income then after the age of 62 you may be able to start using your social security benefits without having to pay income taxes on them.

    To determine all of this, and to see whether your income allows you to gain your benefits without them being taxed you will need to compare your income to the IRS threshold that is put in place to determine who should be paying taxes on the social security benefits that they are receiving.

    Will A Government Pension Impact My Retirement Benefits

    If you worked for an employer that didnt withhold FICA taxes from your salary, such as a government agency, the pension you receive based on that work may reduce your Social Security retirement benefits. This reduction, as part of the windfall elimination provision , affects individuals who earned a pension in any job where FICA taxes werent paid and who worked in other jobs long enough to qualify for Social Security retirement benefits.

    In addition to a reduction in individual benefits, spousal and/or survivor benefits may also be reduced accordingly. In this case, Social Security benefits will be reduced by two-thirds of the government pension.

    You May Like: How Much Would I Get From Social Security

    How To Calculate Social Security Benefits In Excel

    If you are in your late 50s and approaching retirement, you can create a useful model of your future benefits. It works best to do this in a Microsoft Excel spreadsheet, as follows:

    • Using a recent Social Security statement, list in spreadsheet column A your taxable Social Security earnings year by year.
    • List in column B the most recently published NAWI adjustment factors as published by the SSA.
    • Multiply columns A and B and output the result to column C.
    • Identify in column D the 35 highest values in column C. Add these together and divide the sum by 420 . This will approximate your AIME.
    • Use the most recently published bend points to convert your AIME into a PIA.

    You also can fill in hypothetical values for estimated taxable Social Security earnings in future years until you plan to stop working. To be conservative, use a NAWI adjustment factor of 1.0000 in column B for all future years.

    A financial advisor who fully understands this process can help verify your calculations, advise you on when to start Social Security benefits, and estimate the future benefits you can expect to receive.

    When To Take Social Security Benefits

    Fisher Investments Explains How to Estimate Your Social Security Benefit

    You can elect to receive Social Security benefits starting at age 62 or as late as age 70, though your full retirement age depends on the year when you were born. For example, your FRA is 67 if you were born in 1960 or later. If you elect to take your benefit before it, then your Social Security income will be reduced by as much as 30%. Although the total number of payments received will be higher than if you had waited until your FRA, your total lifetime payment could be lower.

    When you reach your FRA, you receive a full benefit based on the amount of Social Security tax paid into the system through your lifetime, up to a maximum monthly benefit amount. Although fewer total checks are received, your total lifetime payout may be higher.

    Those who are able to defer taking Social Security income until after their FRA are given a delayed retirement credit each year past that age until age 70, equivalent to an annual 8% increase for people born in 1943 or later. Waiting until age 70 results in the fewest number of checks received, but delivers a much higher monthly benefit.

    To determine the most appropriate age for you to start taking benefits, you need to calculate your Social Security breakeven age.

    When you elect to take benefits early, you make a permanent choicemeaning that your benefits are reduced over the course of your lifetime, not just until your FRA.

    Read Also: How Much Do They Take Out For Social Security

    Social Security Calculation Step : Adjust All Earnings For Inflation

    So lets jump in with calculating your AIME. To do this, youll need to get use a notepad or a tool like Excel/Google Sheets.

    Youre going to need six individual columns with plenty of room underneath for your information. Set up your columns with the following headings: Year, Age, Actual Earnings, Indexing Factor, Indexed Earnings, Highest 35 Years.

    The first two headings are the year and your age. Go all the way back to the first year you had earnings that were taxed for Social Security. You can find a complete record of this by going to your online SSA account and click the link that says view earnings record. If you dont have an online account, its very easy to set one up.

    This may seem a little redundant to put the year and your age, but itll make another step a little easier.

    Now you just need to copy down the information from the SS earnings history. Youll want to use the part that says your taxed Social Security earnings. Dont skip a year, even if there were no earnings. Just put a zero in.

    Once you have all of your historical earnings recorded, its time to adjust them for inflation. The SSA uses an indexing factor to make sure your future benefit has kept up with inflation, but still based on your earnings.

    Important note hereonly your earnings through age 59 are indexed. All earnings at age 60 and beyond are used in the calculation at face value with no inflation adjustment applied.

    When Will I Receive My Social Security Check

    The Social Security Administration’s payment calendar helps recipients plan for payments. If you were born in the first 10 days of your birth month, then you receive payments by the second Wednesday of the month. Those born on the 11-20 receive payments by the third Wednesday. Those born on the 21-31 receive payments by the fourth Wednesday. However, those who began receiving payments before May 1997 receive payments by the third day of each month.

    Read Also: When To Claim Social Security Benefits

    Special Situation: Both People File Early

    If your deceased spouse had filed for his/her own retirement benefit prior to his/her FRA and you file for your benefit as a survivor prior to your survivor FRA, then the math is a bit more complicated.

    Specifically, your benefit as a survivor would be your deceased spouses PIA, but you must reduce that benefit as described above due to the fact that you filed early . Then, the resulting benefit is limited to the greater of:

    • 82.5% of your deceased spouses PIA, or
    • The amount your deceased spouse was receiving on the date of his/her death.

    How Do I Calculate My Taxable Social Security Benefits

    Should You Delay Applying For Social Security Past Age 70?

    To calculate whether you will be called to pay taxes on your social security benefits you will need to follow a simple step and fill out a simple equation. Adding up your income from all sources with 50% of your Social Security Benefits will give you the amount that is known as your combined income. If that combined income is above the limit that the IRS sets, then you will be made to pay taxes on a part of your social security benefits. What part of them that will be will depend on your specific situation.

    • $25,000 for single filers
    • $32,000 for joint filers

    To try and determine the taxable social security benefits that you will be receiving you can use an online calculator. By adding all of your information there you will be able to see how much of the amount that you are getting is going to be taxed.

    Recommended Reading: How Much Is Social Security

    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.

    How Much Social Security Will I Get In Retirement

    The amount of your monthly Social Security retirement benefit depends on multiple factors, including how much you earn over your working life, how old you are when you retire and allowances for inflation. Understanding how the payment is calculated can help you estimate what to expect and better position yourself to plan for retirement. Here’s how it works.

    Don’t Miss: How Much Social Security Will I Get At Age 70

    How Do You Calculate Your Social Security Taxes

    “Social Security taxes” can refer to taxes paid into the Social Security system or taxes paid on Social Security benefits. The taxes that fund Social Security come from the payroll tax, which is 6.2% for employees or 12.4% for self-employed individuals.

    When you’re receiving Social Security benefits, you’ll still have to pay income taxes, but you won’t owe taxes on all of your benefits. Those whose total annual income tops $34,000 will pay income tax on 85% of their Social Security benefits. Otherwise, they will pay income tax on 50% of their Social Security benefits.

    When To Apply For Benefits How Much Youll Get

    How to Estimate your Social Security Benefits | Your Retirement Authority

    AARP, Updated April 19, 2021

    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.

    You May Like: How Much Can I Earn On Social Security At Age 65

    A Family Maximum Benefit Applies

    Your family may receive benefits based on your earnings record. There is, however, a limit to the amount of monthly benefit that can be based on an individuals Social Security record. The limit varies but generally ranges from 150 to 180 percent of your PIA. Benefits to family members may be reduced if they exceed the family maximum. The formula used to compute the family maximum is similar to that used to compute the PIA.

    Asset allocation and diversification are methods used to help manage investment risk they do not guarantee a profit or protect against investment loss.Note: Investors should consider the investment objectives, risks, charges and expenses associated with 529 plans carefully before investing. More information about 529 plans is available in the issuers official statement, which should be read carefully before investing. Also, before investing, consider whether your state offers a 529 plan that provides residents with favorable state tax benefits. As with other investments, there are generally fees and expenses associated with participation in a 529 savings plan. There is also the risk that the investments may lose money or not perform well enough to cover college costs as anticipated.

    Learn More

    When Will You Collect

    The SSA calculates your benefit amount at your full retirement age . This depends on the year you were born. FRA by birth year is:

    • 19431954: age 66
    • 1955: age 66 and two months
    • 1956: age 66 and four months
    • 1957: age 66 and six months
    • 1958: age 66 and eight months
    • 1959: age 66 and 10 months
    • 1960 and later: age 67

    The monthly amount you are eligible to receive at your FRA is considered your full benefit, but it is not your minimum or maximum benefit.

    You have the option to file for early retirement as early as age 62. But, you may choose to delay taking your benefits until as late as age 70.

    There are many reasons why you might choose to take early retirement or to delay it. That choice has a direct impact on the amount of your monthly payment. If you opt for early retirement, you are choosing a lower monthly payment for the rest of your life. By choosing to delay your benefit to any age between your FRA and age 70, you lock in an increase.

    Also Check: What Comes Out Of Social Security Check

    At What Age Is Social Security Not Taxable

    For Social Security benefits to stop being taxable, you will need to fit certain prerequisites. In most cases, after you reach the age of 64 you can access your Social Security benefits without having to pay taxes on them. However, there is one small caveat to this. If even after the age of 62 you are depending on income other than the one you get from your social security benefits to sustain a major part of your life then you may be required to continue paying taxes on your social security benefits even after the age of 62.

    More articles

    Popular Articles