How Do Benefits Work And How Can I Qualify
While you work, you pay Social Security taxes. This tax money goes into a trust fund that pays benefits to:
Those who are currently retired
To people with disabilities
To the surviving spouses and children of workers who have died
Each year you work, youll get credits to help you become eligible for benefits when its time for you to retire. Find all the benefits Social Security Administration offers.
There are four main types of benefits that the SSA offers:
Learn about earning limits if you plan to work while receiving Social Security benefits
How To Calculate The Social Security Breakeven Age
Your Social Security breakeven age is the point in your life when the total of those lower benefits comes to equal the total of benefits that you would have received if you had waited to take your benefits at FRA, or even later.
For example, if you were born in 1960, your FRA is 67. If you choose to begin receiving Social Security income at age 62, which will be in 2022, then your FRA benefit will be reduced by 30%. Assuming that the full monthly benefit would be $1,000, you will be left with a monthly Social Security check of only $700.
If a co-worker with the same birth date and similar earnings history elects to receive their benefit at FRA five years later, then their benefit will be $1,000 each month. For the first five years, you received a total of $42,000 , while your co-worker received nothing, so you are ahead. Once your co-worker starts receiving benefits, however, they get $300 more each monthor $3,600 more each yearthan you do. So when will your co-worker catch up to you in total benefits?
Lets divide the amount by which you are ahead by the higher amount per year that your co-worker receives. The answer is when you are both 78 years and eight months, or 11.67 years after your FRA. After this point, your co-worker will earn more over their lifetime than you will.
Social Security Benefits Calculator: How Much Will You Get Based On Your Salary
This benefit can be claimed as soon as possible
By 2022, Social Security beneficiaries receive a 5.9% increase, considered the largest boost in benefits in 39 years.
Next year’s benefit is a substantial boost over the 1.3% that retirees saw in 2021.
The maximum monthly payment will be $4,194, while the average benefit will be less than $1,657, according to various reports.
The cost-of-living adjustment increase, an average benefit of $1,657 per month, will be approximately $92 per month for most retired workers.
You May Like: What Years Are Used To Calculate Social Security
Social Security Calculation Step : Primary Insurance Amount Calculation
Now youre ready to determine the heart of your benefit your primary insurance amount . The PIA is simply the result of your benefit calculation and is generally your full retirement age benefit amount.
This is calculation is accomplished by using the bend point formula thats in effect for the year you attain age 62. If you arent 62 yet, youll need to forecast what the bend point formula amounts will be in the year you turn 62. These change annually based on the change in annual wages and generally increase at 3-4%.
There are two numbers that make up this formula which are separated into three separate bands: The amount up to the first number, the amount between the first and second number, and the amount above the second number.
The sum of these three bands is your benefit amount at full retirement age: your PIA, or Full Retirement Age benefit amount.
In the example image below we illustrate an individual with an AIME of $6,000 being applied to the bend point formula.
When You Choose To Start Taking Social Security Benefits
The yearand even the month within that yearthat 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 wont get your full PIA. Itll 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, youll 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.
You May Like: How Do You Calculate Your Social Security Benefits
Lost Or Stolen Federal Payments
Report your lost, missing, or stolen federal check to the agency that issued the payment. It’s usually one of these paying agencies. If your documentation indicates it’s a different agency, and you need its contact information, look in the A-Z Index of U.S. Government Departments and Agencies.
To get an update on your claim, contact the Treasury Department Philadelphia Financial Center at 1-855-868-0151, option 1.
How Can I Calculate My Pia
I was born in 1951How can I calculate my PIA and does the amount increase if I dont start claiming benefits until age 70From age 66 to 70 I have continued to work and my wages exceed the maximum social security wage amountthank you
First you’d need your full Social Security covered earnings history, and then you need to wage-index each year prior to the year in which you turned age 60. The indexing factors for people born in 1951 can be found here: . You then need to divide the sum of the highest 35 wage indexed earnings years by 420 to determine your averaged indexed monthly earnings . Note that any covered earnings years from age 60 on can still be used, but those earnings aren’t indexed.
You can then determine your initial primary insurance amount by applying the applicable percentages to your AIME. The bend points and percentages for someone born in 1951 are as follows:90% of the first $791, 32% of the amount from $792 – $4768, and 15% of any amount above $4768.
For example, if your AIME was $4868 you would calculate your initial PIA as follows:90% of $791 = $711.90 plus32% of $3977 = $1272.64 plus15% of $100 = $15.
Thus, your initial PIA would be $1999.54 , which would be rounded to $1999.50. That would be your PIA in 2013 when you were first eligible for retirement benefits, but you would then need to apply all of the Social Security cost of living increases since 2013 in order to determine your current PIA.
Don’t Miss: Social +security +card +replacement
Using Your Benefit Estimates
As your statement will show, your Social Security retirement benefits will vary depending on when you claim them before or after your full retirement age . The longer you wait to start receiving payments, the higher your benefit amount will be.
However, it’s not always better to wait until your full retirement age to claim your Social Security benefits. If you need your Social Security benefits for living expenses, or you have a health condition that makes it unlikely that you will live past age 75 or so, you may be better off collecting your benefits sooner rather than later. You can use a calculator at the Social Security website to see which retirement age makes the most financial sense for you .
For comprehensive practical information about how and when to claim Social Security benefits, see Social Security, Medicare & Government Pensions, by Joseph Matthews with Dorothy Matthews Berman .
Social Security Increase : How To Calculate Your New Payment
The cost-of-living adjustment will mean an average increase of about $92 each a month for most retired workers, bringing the average benefit of $1,657 per month.
Social Security beneficiaries are slated to receive a 5.9% increase in 2022, the biggest boost in benefits in 39 years.
The cost-of-living adjustment will mean an increase of about $92 a month for most retired workers, bringing the average benefit to $1,657 per month.
The Social Security Administration will be sending out letters to beneficiaries detailing how much increase they will see but you can do a little math to find out how your payment will change.
MSN explains it this way: The easiest way to calculate your benefit is by taking your current monthly payment then multiplying it by 5.9%. Add that amount to the original payment and you will see the increase that will be reflected in your check.
There is something important to keep in mind, however. Medicare Part B premiums are increasing from $140.50 to $170.10, MSN reported. The increase of $29.60 will be taken directly from Social Security checks so whatever increase is added to your existing benefits, you will have to deduct $29.60 to get the final amount.
This years benefit is a substantial boost over the 1.3% retirees saw in 2021. Securitys annual increase, or COLA, is determined each year using the Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W, based on the data through the third quarter.
When will new payments start?
You May Like: At What Age Can I Claim Social Security
How Do I Calculate My 36% Raise On My Social Security Payment In 2012
It was recently announced that anyone receiving Social Security or SSI payments will get a 3.6% raise in 2012. The big question everyone wants to know is exactly how much extra money they will be receiving next year? This article will show you how to calculate your Social Security raise as well as calculate the new total payment including the raise.
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.
Also Check: When Do I Get My Social Security Payment
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.
How Inflation Impacts Your Pia
Your PIA is calculated at age 62. If you wait beyond age 62, cost-of-living adjustments will be applied to your PIA for each year afterward.
If you have already had most of your 35 years of earnings, and you are near age 62 today, the age 70 benefit amount you see on your Social Security statement will likely be higher due to these cos- of-living adjustments. Many people do not account for this when doing their own calculations, which can lead them to think that taking Social Security early is a better deal, when waiting is often the better deal.
In the table below, our hypothetical worker, born in 1954, is eligible for full retirement at age 66. The column on the right shows the effect of inflation for waiting beyond age 62 to take their benefits.
|Effect of Age on Claiming Benefits|
You May Like: How Much Do You Get Social Security
Beginning Benefits Before Fra
If you choose to begin to receive benefits before you reach your full retirement age, one or both of the following calculations will apply:
- 5/9 of 1%: Your benefits are reduced by 5/9 of 1% per month, up to a maximum of 36 months, depending on how many months you have until you reach FRA.
- 5/12 of 1%: If you are more than 36 months away from reaching FRA, the reduction above is applied, and then for the number of months greater than 36, the benefit is further reduced 5/12 of 1% per month.
Therefore, if your FRA is age 66, your benefits would be reduced by 25% if you begin taking them at age 62. Find that figure by taking 5/9 of 1%, or 0.56 multiply by 36 months to get 20%. Then, 5/12, or 0.42, multiplied by the remaining 12 months, is 5% for a total of 25%.
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:
Who Is Eligible To Collect Social Security Retirement Benefits
Workers who are at least age 62 and who have worked at least 10 combined years at jobs for which they paid Social Security taxes are eligible for Social Security retirement benefits. In many cases, spouses, widows and divorcees are eligible for Social Security retirement benefits based on a spouses or ex-spouses earnings history. Unmarried children 18 and younger can also get survivors benefits. You must be a U.S. citizen or lawful alien to collect benefits.
More From Life Changes:
The annual adjustments are based on inflation. So bigger monthly checks mean that consumer prices have also gone up. Consequently, the extra cash may not go as far.
The average monthly retirement benefit will go up by $92 to $1,657 in 2022 from $1,565 in 2021.
But the size of the increase will vary by beneficiary.
“Anybody who is currently in receipt of a benefit should take a look at what their benefit is and imagine what a roughly 5.9% increase will do to that benefit level,” Stephen Goss, chief actuary at the Social Security Administration, said during a recent webinar hosted by the Bipartisan Policy Center.
However, there is one thing that will offset how large those checks will be: Medicare Part B premiums.
Those payments toward Medicare Part B are often deducted directly from beneficiaries’ monthly checks. However, not everyone has Medicare Part B coverage, particularly if they are still covered under an employer health plan or if they have not yet reached Medicare eligibility age, which is 65.
The standard Medicare Part B premium is projected to be $158.50 per month, up from $148.50 this year. However, the rates for next year have not been officially announced.
If you are not covered by Medicare Part B, you can multiply your monthly benefit amount by 1.059 to approximate your payment for next year, said Joe Elsasser, founder and president of Covisum, a Social Security claiming software company.
Recommended Reading: Claiming Spouse Social Security