Monday, May 16, 2022

How Much Have I Put Into Social Security

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Social Security – How much can I expect to receive
  • SSA Online Calculator: This simplified calculator will give you a rough estimate of your possible Social Security benefits.
  • SSA Detailed Calculator: This calculator asks for more detail, so it gives you a better estimate of your Social Security benefits.
  • SSA Retirement Estimator: If you have enough credits to receive Social Security, you haven’t applied for benefits, and you aren’t receiving benefits, you can use this calculator. It automatically inputs your earnings and other information using your Social Security records.
  • Retirement Benefit Sheet: This fact sheet from the SSA includes a worksheet that you can fill out to estimate your benefit on your own. If you want to do the math on your own so you’re more familiar with how the formula works, this is the place to do it.

Policy Basics: Top Ten Facts About Social Security

Social Security provides a foundation of income on which workers can build to plan for their retirement. It also provides valuable social insurance protection to workers who become disabled and to families whose breadwinner dies.

Eighty-five years after President Franklin Roosevelt signed the Social Security Act on August 14, 1935, Social Security remains one of the nations most successful, effective, and popular programs.

How Is The Social Security Tax Used

Income taxes you pay are deposited into the general fund of the United States. They can be used for any purpose, but Social Security taxes are different.

These taxes are paid into special trust funds that should only be used to pay current and future Social Security retirement benefits, as well as disability benefits and benefits for widows and widowers. Today’s workers contribute their percentage, which in turn is paid to today’s beneficiariesthose workers who have retired and who are now collecting Social Security benefits. When today’s workers retire, they’ll tap into the benefits being paid by tomorrow’s workers.

Read Also: How Much Will I Receive From Social Security When I Retire

Fact #: Social Security Provides A Foundation Of Retirement Protection For Nearly Every American And Its Benefits Are Not Means

97% of the elderly either receive Social Security or will receive it.

Almost all workers participate in Social Security by making payroll tax contributions, and almost all elderly Americans receive Social Security benefits. In fact, 97 percent of the elderly either receive Social Security or will receive it, according to Social Security Administration estimates. The near-universality of Social Security brings many important advantages.

Social Security provides a foundation of retirement protection for people at all earnings levels. It encourages private pensions and personal saving because it isnt means-tested in other words, it doesnt reduce or deny benefits to people whose income or assets exceed a certain level. Social Security provides a higher annual payout than private retirement annuities per dollar contributed because its risk pool is not limited to those who expect to live a long time, no funds leak out in lump-sum payments or bequests, and its administrative costs are much lower.

Indeed, universal participation and the absence of means-testing make Social Security very efficient to administer. Administrative costs amount to only 0.6 percent of annual benefits, far below the percentages for private retirement annuities. Means-testing Social Security would impose significant reporting and processing burdens on both recipients and administrators, undercutting many of those advantages while yielding little savings.

Benefit Reduction If Taken Before Full Retirement Age

How Much Money Have I Put Into Social Security ...

When calculating benefits for early retirement, there are one or two calculations, depending on how early benefits are taken. Assuming a normal retirement age of 67, the age of 62 is the earliest year a person can receive benefits or 60 months early.

The benefit is reduced by 5/9 of 1% for each month before the normal retirement age , up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of 1% per month.

For example, let’s say that a person wants to retire at 62, leading to a 60-month reduction from the normal retirement age of 67. The first 36 months would be calculated as 36 months times 5/9 of 1% plus 24 months times 5/12 of 1%.

  • First 36 months: 5/9 = .5555 * 1% = .005555 * 36 months = .19999 or 20%*
  • Remaining 24 months: 5/12 = .416666 * 1% = .00416666 * 24 months = .0999 or 10%
  • In other words, benefits would be reduced by 30% if taken at age 62.

*The results were rounded and multiplied by 100 to create a percentage.

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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.
  • 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.

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    Primary Insurance Amount Calculation

    For 2022, the SSA established the first bend point as $1,024 and the second bend point as $6,172. Using the AIME from the earlier example of $10,141 and the bend points, we can calculate the primary insurance amount .

    Below are the steps to calculating the PIA:

    • Multiply the first $1,024 of the person’s AIME by 90% = $921.60
    • Subtract the 1st and 2nd bend point and multiply that difference by 32% = $5,148*.32 = $1,647.35*
    • Subtract the 2nd bend point amount from the total AIME amount and multiply the difference by 15%. = $3,969*.15 = $595.35

    *Please note that the calculation results are required to be rounded down to the next lower multiple of 10 cents.

    • The PIA is the sum of the three calculation results: = $3,164.30

    *The multipliers90%, 32%, and 15%are set by law and do not change annually. The bend points are inflation-indexed but only through age 62. PIA is effectively locked in at age 62.

    How Much Is The Windfall Elimination Provision Penalty

    Social Security benefits increasing in 2022

    In cases where the WEP applies your monthly benefits are reduced using the following chart. Find the intersection between the eligibility year and the number of years you paid into social security. Keep in mind the WEP reduction limit is half of your pension from non-covered employment.

    Years of Substantial Earnings

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    If You Opt Out Of Social Security Do You Still Get The Money You Already Put In

    Most pastors dont go straight from high school or college into the pulpit. Usually, you spend a few years in the secular workforce before settling into your pastoral vocation.

    I think thats a good thing. It gives you some practical work experience, exposes you to how people outside of the church live and work, and, depending on where you work, it can make you really, really appreciate working with Christians once youre on church staff. At least that was my experience.

    Another thing that working a secular job before joining the ministry does is that it forces you to begin paying into the Social Security system. Remember, pastors are unique in their ability to opt out. Everyone else just has to do it and has no say in the matter.

    But, what happens to the money that you put into the system if you choose to opt out once you become a licensed minister? Is it all gone or do you still get that money even though youve opted out?

    Claim That Politicians Exempted Themselves From The Tax

    Critics of Social Security have said that the politicians who created Social Security exempted themselves from having to pay the Social Security tax. When the federal government created Social Security, all federal employees, including the president and members of Congress, were exempt from having to pay the Social Security tax, and they received no Social Security benefits. This law was changed by the Social Security Amendments of 1983, which brought within the Social Security system all members of Congress, the president and the vice president, federal judges, and certain executive-level political appointees, as well as all federal employees hired in any capacity on or after January 1, 1984. Many state and local government workers, however, are exempt from Social Security taxes because they contribute instead to alternative retirement systems set up by their employers.

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    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.

    Social Security Windfall Elimination Provision

    Will Your Stimulus Check Increase the Tax on Your Social ...

    The Social Security windfall elimination provision can cut your benefits by 60%

    Most individuals enter retirement knowing theyve got some form of Social Security benefit coming. What you may not know is if youre subject to the windfall elimination provision, and how much your Social Security benefits may be cut.

    Some people are eligible for multiple retirement income streams. This occurs when you pay into more than one retirement system. The windfall elimination provision is designed to make sure you dont get too much retirement income.

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    Reducing Cost Of Living Adjustment

    At present, a retiree’s benefit is annually adjusted for inflation to reflect changes in the consumer price index. Some economists argue that the consumer price index overestimates price increases in the economy and therefore is not a suitable metric for adjusting benefits, while others argue that the CPI underestimates the effect of inflation on what retired people actually need to buy to live.

    In 2003 economics researchers Hobijn and Lagakos estimated that the social security trust fund would run out of money in 40 years using CPI-W and in 35 years using CPI-E.

    Private Retirement Savings Crisis

    While inflation-adjusted stock market values generally rose from 1978 to 1997, from 1998 through 2007 they were higher than in March 2013. This has caused workers’ supplemental retirement plans such as 401s to perform substantially more poorly than expected when current retirees were investing the bulk of their savings in them. In 2010, the median household retirement account balance for workers aged 55 to 64 was $120,000, which will provide only a trivial supplement to Social Security benefits, but about a third of households had no retirement savings at all. 75% of Americans nearing retirement age had less than $30,000 in their retirement accounts, which Forbes called “the greatest retirement crisis in American history.”

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    Estimated Net Benefits Under Differing Circumstances

    In 2004, Urban Institute economists C. Eugene Steuerle and Adam Carasso created a Web-based Social Security benefits calculator. Using this calculator it is possible to estimate net Social Security benefits for different types of recipients. In the book Democrats and Republicans âRhetoric and Reality Joseph Fried used the calculator to create graphical depictions of the estimated net benefits of men and women who were at different wage levels, single and married , and retiring in different years. These graphs vividly show that generalizations about Social Security benefits may be of little predictive value for any given worker, due to the wide disparity of net benefits for people at different income levels and in different demographic groups. For example, the graph below shows the impact of wage level and retirement date on a male worker. As income goes up, net benefits get smaller âeven negative.

    However, the impact is much greater for the future retiree than for the current retiree . The male earning $95,000 per year and retiring in 2045 is estimated to lose over $200,000 by participating in the Social Security system.

    The next image shows estimated net benefits for married men and women at different wage levels. In this particular scenario it is assumed that the spouse has little or no earnings and, thus, will be entitled to collect a spousal retirement benefit. According to Fried:

    Fact #: Social Security Is Particularly Important For People Of Color

    How much your Social Security benefits will be if you make $30,000, $35,000 or $40,000

    Social Security is a particularly important source of income for groups with low earnings and less opportunity to save and earn pensions, including Black and Latino workers and their families, who face higher poverty rates both during their working lives and in old age. The poverty rate among Black and Latino seniors is over 2.5 times as high as for white seniors. There is a significant racial retirement wealth gap, leading seniors of color to face more retirement insecurity than white seniors. African American and Latino workers are less likely to be offered workplace retirement plans and likelier to work in low-wage jobs with little margin for savings. Social Security helps reduce the economic disparities between white seniors and seniors of color.

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    Refund Of Taxes Withheld In Error

    If social security or Medicare taxes were withheld in error from pay that is not subject to these taxes, contact the employer who withheld the taxes for a refund.

    If you are unable to get a full refund of the amount from your employer, file a claim for refund with the Internal Revenue Service on Form 843, Claim for Refund and Request for Abatement. Attach the following items to Form 843:

    • A copy of your Form W-2 to prove the amount of social security and Medicare taxes withheld,
    • A copy of the page from your passport showing the visa stamp,
    • INS Form I-94,
    • If applicable INS Form I-538, Certification by Designated School Official, and
    • A statement from your employer indicating the amount of the reimbursement your employer provided and the amount of the credit or refund your employer claimed or that you authorized your employer to claim. If you cannot obtain this statement from your employer, you must provide this information on your own statement and explain why you are not attaching a statement from your employer.

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    The Big One Delayed Retirement Credits

    One of the most important factors in determining your Social Security benefit is timing. The earliest you can file for Social Security benefits is 62, with the latest being 70. The earlier you take benefits, the less you will receive the longer you wait, up to age 70, the more you will receive.

    Depending on your benefit amount and at which age you decide to begin distributions, you could almost double the benefits you receive each month. This is because if you wait, you can use delayed retirement credits.

    Delayed retirement credits are the financial reward Social Security gives you for putting off claiming your retirement benefit, AARP explains. Credits begin to accumulate the month you hit your full retirement age

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    For each month from your full retirement age until age 70 that you postpone filing for benefits, the Social Security Administration increases your eventual benefit by about two-thirds of 1% a total of 8% for each year you wait. This means retirees who reach full retirement age at 67 but delay claiming until 70 will get an extra 24% tacked on to their monthly benefit.

    The credits accrue through age 69 but work somewhat in the reverse if you decide to take benefits early.

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