Maximum Social Security Benefits Example
Say that someone who turned 62 in 2021 will reach FRA at 66 years and 10 months, with earnings that make them eligible at that point for a monthly benefit of $1,000. Opting to receive benefits at age 62 will reduce their monthly benefit by 29.2% to $708 to account for the longer time they could receive benefits, according to the Social Security Administration . That decrease is usually permanent.
If that same person waits to get benefits until age 70, their monthly benefit increases to $1,253. The larger amount is due to the delayed retirement credits earned for the decision to postpone receiving benefits past FRA. In this example, that higher amount at age 70 is about 77% more than the benefit they would receive each month if benefits started at age 62, or a difference of $545 each month.
Of course, the best time for someone to start taking Social Security benefits depends on a variety of factors, not just the dollar amount of the benefit. Things such as current income and employment status, other available retirement funds, and life expectancy must also be factored into the decision.
The Social Security Administration has several calculators to help you estimate your benefits.
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:
What Is A Social Security Card
Your Social Security card is an important piece of identification. You’ll need one to get a job, collect Social Security, or receive other government benefits.
When you apply for a Social Security number , the Social Security Administration will assign you a nine-digit number. This is the same number that is printed on the Social Security card that SSA will issue you. If you change your name, you will need to get a corrected card.
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Calculate Your Average Indexed Monthly Earnings
Once you have your inflation-adjusted 35 years, youll divide that amount by 420. Thats the number of months in a 35-year period, so it gives you a monthly inflation-adjusted amount. That amount will be rounded down to the nearest lower dollar amount. If you retired today, that would be the amount the SSA would use to determine your monthly Social Security benefit.
If you were taking retirement in 2021, SSA would take your inflation-adjusted, indexed wages for every year prior to 2019. Any wages you earned after 2019 wouldnt be indexed. Assuming those two years were among your 35 highest-earning years, the amount would be added to your total before being divided by 420.
Check Different Claiming Ages
If you don’t like the benefit estimate you see for claiming at 62, try testing other claiming ages. You can also do this right from your account, using the slider below the benefit chart. Move the slider to age 63, for example, and you’ll see a new, higher benefit estimate. Move it again to 63 and 1 month, and the benefit goes up again.
Here’s how the math works. You qualify for your full benefit at FRA. When you claim early, your benefit is reduced according to the number of months until you reach FRA. For the first 36 months, the monthly reduction is five-ninths of 1%. For any months beyond 36, the monthly reduction is five-twelfths of 1%. Delaying your claim for even one month translates to higher Social Security income, because you reduce the number of monthly reductions applied to your benefit.
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Benefits Could Be Cut
According to the 2020 annual report from the board of trustees, the funding shortfall could be solved by cutting benefits by 19% for all Social Security beneficiaries including those who are currently receiving benefits or cutting benefits by 23% for future Social Security beneficiaries. If nothing is done until 2035, however, all benefits would need to be reduced by 25%.
How To Get A Social Security Card
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How Does Full Retirement Age Affect Your Social Security Benefits
If you claim your benefits at full retirement age, you will receive your standard Social Security benefit amount. If you claim prior to FRA, you will be subject to early filing penalties that reduce your benefit by the following amounts:
- 5/9 of 1% for each of the first 36 months before FRA
- 5/12 of 1% for each subsequent month before FRA
This amounts to a 6.7% annual reduction for each of the first three years and an additional 5% reduction for each following year before FRA. If you claim benefits at 62 with an FRA of 67, you will face a full 30% reduction in benefits.
By contrast, if you claim benefits after FRA, you receive delayed retirement credits valued at 2/3 of 1% per month. This results in an 8% annual increase to your monthly benefit. Delayed retirement credits can be earned until age 70, after which time there is no financial benefit to delaying your claim. Delayed retirement credits cannot be earned if you are claiming either spousal or survivor benefits.
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.
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What If I Continue Working In My 60s
Many people whose health allows them to continue working in their 60s and beyond find that staying in the workforce keeps them young and gives them a sense of purpose. If this sounds like something youâd like to do, know that working after claiming early benefits may affect the amount you receive from Social Security. Why? Because the Social Security Administration wants to spread out your earnings so you donât outlive them. If you claim Social Security benefits early and then continue working, youâll be subject to whatâs called the Retirement Earnings Test.
If youâre between age 62 and your full retirement age, and youâre claiming benefits, you need to know about the Earnings Test Exempt Amount, a threshold that changes yearly. For 2021, the Retirement Earnings Test Exempt Amount is $18,960/year . If youâre in this age group and claiming benefits, then every $2 you make above the Exempt Amount will reduce by $1 the Social Security benefits you’ll receive.
Contrary to popular belief, this money doesnât disappear. It gets credited back to you – with interest – in the form of higher future benefits. You may hear people grumbling about the Social Security âEarnings Taxâ, but itâs not really a tax. Itâs a deferment of your benefits designed to keep you from spending too much too soon. And after you hit your full retirement age, you can work to your heartâs content without any reduction in your benefits.
Find Out Your Estimated Social Security Benefits
Periodically checking your estimated Social Security benefits serves several purposes: It helps you plan for retirement and allows you to check for and correct errors.
The Social Security Administration keeps a database of your earnings record and work credits, tracking both through your Social Security number. You can see this information on your Social Security Statement, which is available to everyone age 25 and over. The Social Security Statement also gives you an estimate of the benefits you’ll receive at retirement age, which can play an important role in your financial planning.
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How Does The Social Security Administration Calculate Benefits
Benefits also depend on how much money youâve earned in life. The Social Security Administration takes your highest-earning 35 years of covered wages and averages them, indexing for inflation. They give you a big fat âzeroâ for each year you donât have earnings, so people who worked for fewer than 35 years may see lower benefits.
The Social Security Administration also makes annual Cost of Living Adjustments, even as you collect benefits. That means the retirement income you collect from Social Security has built-in protection against inflation. For many people, Social Security is the only form of retirement income they have that is directly linked to inflation. Itâs a big perk that doesnât get a lot of attention.
Here’s 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 don’t 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 that’s 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 you’re willing to make some assumptions, it is possible to estimate your future monthly Social Security benefit.
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Chapter : Who Is Eligible For Survivor Benefits From Social Security
- A widow or widower age 60 or older who was and did not remarry before age 60
- A surviving divorced spouse who was married to the deceased for at least 10 years
- A widow or widower of any age caring for the deceaseds child who is under 16 or disabled and receiving benefits on their record
- An unmarried child of the deceased who is: younger than age 18 or age 18 or older with a disability that began before 22
- Parents of the deceased worker who are 1) at least 62 2) were dependent on the deceased for at least half of their income, and 3) whose own Social Security benefit is not larger than that of their deceased child
Did you Know?
If you were married to the deceased for at least9 months, you could be eligible for survivors benefits.
Work With An Experienced California Disability Benefits Lawyer
Dealing with a disability that leaves you unable to work can be difficult enough on its own. For many people, the thought of going through the bureaucracy involved with filing for disability benefits is overwhelming. Our team is here to help.
At RCM Legal, we have advocating for people with disabilities and those who have suffered injuries. We take an aggressive approach to each case, working hard to help our clients get the benefits that they deserve. To learn more or to schedule a free consultation with a Los Angeles disability benefits attorney, call us at or fill out our online contact form.
Verify Your Earnings History
The amount of the benefits you or your family receives depends on the amount of earnings shown on your record. Regularly checking your SSA earnings history can help ensure there are no surprises when its time for you to start receiving benefits. You can find your earnings history on your annual Social Security Statement. Create a free my Social Security account to check your earnings history online.
Check The Social Security Administration’s Math
Your statement includes a record of the earnings on which you’ve paid taxes and an estimate of the benefits you will receive at various retirement ages: 62, 67, and 70. It is always wise for you to check the SSA’s numbers. Don’t be surprised if you uncover an error. Some government-watchers estimate that the SSA makes mistakes on at least 3% of the total official earnings records it keeps.
When you check your record, make sure that the Social Security number noted on your earnings statement is your own, and make sure the earned income amounts listed on the agency’s records mesh with your own records of earnings as listed on your income tax forms or pay stubs.
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How Your Social Security Benefits Are Calculated
Your Social Security benefits are based on the 35 calendar years in which your income was the highest. If you have fewer than 35 years of earnings, each year with no earnings will be entered as zero. You can increase your Social Security benefit at any time by replacing a zero or low-income year with a higher-income year.
There is a maximum Social Security benefit amount you can receive, though it depends on the age you retire. For someone at full retirement age in 2021, the maximum monthly benefit is $3,113. For someone filing at age 70, the maximum monthly amount is $3,895.
Ways To Balance Social Securitys Budget
Even though Social Security isnt expected to run out of money for 15 years, several options for changes have already been floated to deal with the budget shortfall. These options include:
- Raising the payroll tax rate
- Increasing the wages subject to Social Security taxes
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How Your Retirement Age Affects How Much Youll Receive
Perhaps the most significant factor on how much you will receive in Social Security benefits each month is the age you retire at and start collecting benefits. What you receive when you start taking payments is what youll receive for the rest of your life, so its important to put some thought into deciding when to retire.
Depending on the year you were born, the full retirement age is 65 to 67. If you start collecting benefits then, youll get the amount calculated in the Social Security formula each month.
You can start getting benefits at age 62, but you wont receive the whole monthly amount youre entitled to. If you take your benefits early, you can expect to get about 75 percent of what you would have if you waited. Your benefits are reduced by a fraction of a percent for every month you take early payments.
Taking a late retirement swings things in the opposite direction. If you wait until the age of 70 to start drawing benefits, youll get about 30 percent more than you would have at full retirement age.
Remember there is no best age for retirement, as each persons finances are different. Taking early, full, or late retirement all end up paying out about the same amount of money over time.
At What Age Is Social Security No Longer Taxed
At 65 to 67, depending on the year of your birth, you are at full retirement age and can get full Social Security retirement benefits tax-free. However, if youre still working, part of your benefits might be subject to taxation. The IRS adds the figures for your earnings and half your Social Security benefits.
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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.
How Much Money Will I Get From Social Security In 2022
Social Security beneficiaries will receive a 5.9% increase in benefits in 2022, the biggest increase since 1982.
Most retired workers will see an increase of $92 per month, bringing the average benefit among retirees to amount to $1,657 a month.
The Social Security Administration will be distributing letters to beneficiaries explaining how much of an increase they will get, but for those interested in finding out sooner, you can do some simple calculations to find out how much your payments will change.
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