Monday, May 16, 2022

How Do You Figure Your Social Security

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Finding Your Social Security Number

How to Calculate Your Social Security Benefits

If you find yourself thinking, What is my SSN, then one of the easiest ways to find it is by looking on existing documentation that you may already have. Believe it or not, your Social Security number is listed on many documents that you might already have in your possession. It is a nine-digit number that will usually contain two hyphens. First, try and locate your Social Security card. Your number will be plainly displayed there. If you cannot find your card, there is still hope.

You can still try some of these other documents that are likely to have your number on them. Look for some of your old tax returns. Your number will be listed typically on the first page of your tax return. You can also check your W-2 from your employer and maybe even your bank statements. Both of these documents are common places to find your SSN listed. If you still have no luck, check your drivers license. While most states no longer display your SSN on your license, it is worth a look. If you have an immigrant visa, then your USCIS Forms are the next place you should look. SSNs are common on your visa paperwork, so you can often find your number there. If you are unable to find your number anywhere you look, then youll need to contact the SSA to start the process of getting a replacement Social Security card.

Calculate My Social Security Income

These days thereâs a lot of doom and gloom about Social Securityâs solvency – or lack thereof. And regardless of whether you think Social Securityâs future is secure, the fact remains that you shouldnât plan on living exclusively off your Social Security benefits. After all, Social Security wasnât designed to make up a retireeâs entire income.

Still, many people do find themselves in the position of having to live off their Social Security checks. And even if you have other income sources in retirement, Social Security can make up a significant part of your retirement income plan. That’s why itâs important to know all the rules surrounding eligibility, benefit amounts, taxation and more.

Do you need help managing your retirement savings? To find a financial advisor near you, try our free online matching tool.

The Failure To Account For Inflation

The other big problem with both the calculators available online is the absence of inflation. Failing to account for benefits increases due to cost of living adjustments skews the final numbers.

To fully understand the impact of inflation, you need to understand how the annual COLA changes your benefit amount.

When you receive your benefit estimate, it shows what the estimated benefit will be at certain ages without considering the impact of cost of living adjustments.

For example, if you are 62 and your Social Security benefits estimate says that you are eligible for a $2,000 benefit at your full retirement age, that future benefit is expressed in todays dollars. If you filed today, you would receive a reduced benefit based on that $2,000.

If you waited until age 63 to file, it would be the $2,000 plus adjustments for inflation for that year minus reductions for filing early. The same carries all the way through to age 70.

So if you want to do this calculation on your own, be sure to inflate the full retirement age benefit for every year after 62 and then reduce or increase based on filing age.

Ive seen some publications with experts recommending to not use the COLA when performing this calculation. I cant figure that out, because COLA increases will happen. Maybe not every year, but over the past 45 years there have only been three years without a COLA.

Read Also: How To Find Out My Current Social Security Benefits

Your May Have To Pay Taxes On Social Security Benefits

Most people know that you pay tax into the Social Security Trust Fund throughout your career, but some retirees don’t realize that you also have to pay tax on your Social Security benefits once you start taking them. Benefits lost their tax-free status in 1984, and the income thresholds for triggering tax on benefits haven’t been increased since then.

It doesn’t take a lot of income for your Social Security benefits to be taxed. For example, a married couple with a combined income of more than $32,000 may have to pay income tax on up to 50% of their Social Security benefits. Higher earners may have to pay income tax on up to 85% of their benefits.

You may also have to pay state income taxes on your Social Security benefits. See our list of the 12 States That Tax Social Security Benefits.

The Problem: The Economic Toll From The Pandemic Will Very Likely Affect Social Security Benefits

10 free or cheap Social Security calculators to help you ...

The initial retirement benefits that Social Security beneficiaries receive in the first year of retirement are determined by a formula that depends, in part, on the growth of average wages in the economy. Due to the economic fallout from the COVID-19 pandemic, the key measure of average wagesthe average wage index is very likely to decline in 2020. As a result, the initial retirement benefits for those who are first eligible to receive benefits in 2022when they reach the age of 62would be significantly less than what was anticipated only months ago, before the pandemic began to exact its economic toll. The effect is very likely to be so significant that workers turning 62 in 2022 would receive initial retirement benefits that are less than those of workers who were born a year earlier and who had essentially the same earnings history. This incongruity is what Social Security experts call a benefit notch. Such a notch would be unfair to the beneficiaries who turn 60 in 2020 and first become eligible to retire in 2022 because benefits are normally expected to grow for each successive cohort of retirees. Moreover, the benefit reduction and notch would have long-lasting consequences, as they not only would affect benefits in the first year of ones retirement but also lower them for every year going forward, as annual benefits are determined by adjusting the initial level for inflation.

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List Each Year’s Earnings

Your earnings history is shown on your Social Security statement, which you can now obtain online.

In the table below, sample earnings for a hypothetical worker born in 1953 are shown in Column C. Only earnings below a specified annual limit are included. This annual limit of included wages is called the “Contribution and Benefit Base” and is shown as Max Earnings in Column H in the table.

How Can I Find My Social Security Number Online

You will need to have a My Social Security account to access your SSN online. If you have not already signed up for an account, then you will not be able to get one until you find your number using another method. Knowing your SSN is required to sign up for an account, but once you have the account, you can access it using your user name and password.

Also Check: How To Find Out My Current Social Security Benefits

What To Do If You Find Out You Dont Qualify For Social Security

Most Americans contribute to Social Security as they work throughout their careers, then expect a payout once they retire. In fact, for some retirees, Social Security is the primary source of their income in retirement, if not their entire nest egg. But what happens if you are nearing retirement and you find out that you dont qualify for Social Security? Here are some steps to take if you find yourself in this situation.

Social Security 2022: How the COLA Will Increase Benefits for the Average Senior Couple

What A Social Security Break

How To Calculate Social Security Benefits [3 Easy Steps]

In a nutshell, a Social Security break-even calculator can tell you when the best age is to start taking Social security benefits, in terms of how much money you could expect to receive over time. Going back to the previous example, lets assume that you track your benefit amounts over a 10-year, 20-year and 30-year period. Heres how your total benefits received would look over each of those periods, for all three starting points.

Your cumulative benefits after 10 years:

  • $144,000, starting at age 62
  • $122,400, starting at age 66
  • $52,800, starting at age 70

Your cumulative benefits after 20 years:

  • $288,000, starting at age 62
  • $326,400, starting at age 66
  • $316,800, starting at age 70

Your cumulative benefits after 30 years:

  • $432,000, starting at age 62
  • $530,400, starting at age 66
  • $580,800, starting at age 70

You can see that youd draw the most Social Security benefits in total if you wait until age 70 to start taking them, assuming you live to age 100. But that could be a big if when youre not in the best health.

What you have to keep in mind when using a Social Security break-even calculator is that the numbers are hypothetical. They dont take into things that could affect your ability to draw benefits or how far those benefits might go, such as:

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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.

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.

Also Check: How To Find A Person With Their Social Security Number

Spouses Survivors And Dependents

Spouses, survivors and qualifying dependents can collect Social Security benefits based on the primary insured’s PIA.

A spouse can claim 50% of the primary worker’s full PIA if they retire at the Normal Retirement Age or if they are caring for a qualified child. A spouse who is not caring for a qualified child and who retires after 62 but before their Normal Retirement Age will get reduced benefits down to a low of 32.5% of the primary worker’s benefit.

A qualifying child can claim up to 50% of a retired worker’s benefits or, if they are a surviving child, up to 75% of a deceased worker’s benefits. However, in cases where a family has multiple claimants , the combined family benefit is capped at between 150 – 180% of the primary worker’s benefits.

Finally, a surviving spouse who has reached their Normal Retirement Age can opt to collect their deceased spouse’s benefits instead of their own. In this case, they will receive 100% of the primary worker’s benefits. A younger widow/widower who is caring for a qualified child can collect 75% of the primary worker’s benefits.

You can only collect under one benefits program. Any beneficiary who qualifies for multiple sources of income will receive the higher of their qualifying benefits.

How Much Is Paid In Social Security For Services Rendered

How to Calculate Social Security Benefits: 13 Steps

In the service contract, social security contributions must be made as an independent worker, i.e., on 40% of the monthly income, provided that the minimum base is not less than one minimum salary, with the corresponding bases as explained in the following article.

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Social Security Calculation Example

Take someone who turned 62 in 2018. He has worked since he was 32 and each year earned an inflation-adjusted income of $60,000. His AIME would be:

  • $80,000 x 30 + $0 x 5 = $2,400,000
  • $2,400,000 / 35 = $68,571
  • $68,571 / 12 = $5,714

Since our sample recipient has turned 62 this year, benefits will be fixed to the 2018 bend points even if he doesn’t retire until 67. His PIA would therefore be:

Calculating Your Social Security Income Tax

If your Social Security income is taxable, the amount you pay in tax will depend on your total combined retirement income. However, you will never pay taxes on more than 85% of your Social Security income. If you file as an individual with a total income thats less than $25,000, you wont have to pay taxes on your Social Security benefits in 2021, according to the Social Security Administration.

For the 2021 tax year, single filers with a combined income of $25,000 to $34,000 must pay income taxes on up to 50% of their Social Security benefits. If your combined income was more than $34,000, you will pay taxes on up to 85% of your Social Security benefits.

For married couples filing jointly, you will pay taxes on up to 50% of your Social Security income if you have a combined income of $32,000 to $44,000. If you have a combined income of more than $44,000, you can expect to pay taxes on up to 85% of your Social Security benefits.

If 50% of your benefits are subject to tax, the exact amount you include in your taxable income will be the lesser of either a) half of your annual Social Security benefits or b) half of the difference between your combined income and the IRS base amount.

The example above is for someone who is paying taxes on 50% of his or her Social Security benefits. Things get more complicated if youre paying taxes on 85% of your benefits. However, the IRS helps taxpayers by offering software and a worksheet to calculate Social Security tax liability.

Also Check: How To Hide Money From Social Security Disability

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.

  • For earnings that fall within the first band, you multiply by 90%. That is the first part of your benefit.
  • For earnings that fall within the second band, you multiply by 32%. That is the second part of your benefit.
  • For earnings that are greater than the maximum of the second band, you multiply by 15%. This is the third part of your benefit.
  • 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.

    Uncle Sam Can Tax Up To 85% Of Your Social Security Benefits If You Have Other Sources Of Income Such As Earnings From Work Or Withdrawals From Tax

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    Many people are surprised to learn that Social Security benefits are taxable. But if you look at how the federal tax on Social Security is calculated, you’ll notice that benefits aren’t taxed for most people who only have income from Social Security. For 2021, the estimated average monthly Social Security check is $1,543, which comes to $18,516 per year. That’s well below the minimum amount for taxability at the federal level.

    On the other hand, if you do have other taxable incomesuch as from a job, a pension or a traditional IRAthen there’s a much better chance that Uncle Sam will take a 50% or 85% bite out of your Social Security check. Plus, depending on where you live, your state might tax a portion of your Social Security benefits, too.

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