When Will I Know If My Social Security Benefits Are Increasing
The Social Security Administration will disclose next year’s Cost of Living Adjustment some time in October. Beneficiaries should receive letters in December 2022 detailing their new benefit rate for 2023. If you miss this letter, you can still verify your specific increase online via the My Social Security website.
State Taxes On Social Security Benefits
Everything weve discussed above is about your federal income taxes. Depending on where you live, you may also have to pay state income taxes.
There are 13 states that collect taxes on at least some Social Security income. Four of those states follow the same taxation rules as the federal government. So if you live in one of those four states then you will pay the states regular income tax rates on all of your taxable benefits .
The other nine states also follow the federal rules but offer deductions or exemptions based on your age or income. So in those nine states, you likely wont pay tax on the full taxable amount.
The other 37 states do not tax Social Security income.
|State Taxes on Social Security Benefits|
|Taxed According to Federal Rules||Minnesota, North Dakota, Vermont, West Virginia|
|Partially Taxed||Colorado, Connecticut, Kansas, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah|
|No State Tax on Social Security Benefits||Alabama, Alaska, Arizona, Arkansas, California, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Nevada, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, Wisconsin, Wyoming|
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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Maximum Social Security Benefits You Can Get
The maximum monthly Social Security benefit available to someone retiring in 2021 is $3,895, which assumes that:
- They worked 35 years or more
- In their 35 top-earning years, their income met or exceeded the SSA’s maximum taxable amount, so that they paid the largest Social Security tax amount possible for each of those years
- They are retiring at age 70, which entitles them to the maximum delayed retirement credit
For comparison, the table below lists the monthly benefits for workers who plan to retire in 2021 whose earnings met or exceeded the SSA maximum-taxable limit every year of their working lives, from age 22. This situation is far from typical, but it shows the impact of retirement age on Social Security benefits, isolated from other factors.
|Maximum Social Security Benefit for Workers Retiring in 2021|
How Can I Avoid Paying Taxes On Social Security
How to pay the least amount of tax on your Social Security benefits Put your income-producing assets in an IRA. Reduce the amount of money your company makes. Reduce the amount of money you take out of your retirement accounts. Make a donation to meet your minimum distribution requirement. Make sure youre taking the largest amount of capital loss possible.
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What Happens To My Social Security If I Stop Working At 55
If you stop work before you start receiving benefits and you have less than 35 years of earnings, your benefit amount is affected. We use a zero for each year without earnings when we calculate the amount of retirement benefits you are due. Years with no earnings reduces your retirement benefit amount.
A Quick Note About Life Expectancy: According To The Social Security Administration Average Life Expectancy For A 65
Your spouse: If you are married, you can explore additional strategies to maximize the benefits you receive collectively. Start by taking your spouse’s age, health, and benefits into account, particularly if you’re the higher-earning spouse. The amount of survivor benefits for a lower-earning spouse could depend on the deceased, higher-earning spouse’s benefitthe bigger the higher-earning spouse’s benefit, the bigger the benefit for the surviving spouse.
Whether you’re still working. Earning a wage can reduce your benefit temporarily if you take Social Security early. If you’re still working and you haven’t reached your full retirement age, $1 in benefits will be deducted for every $2 you earn above the annual limit .
In the year you reach your full retirement age, the reduction falls to $1 in benefits deducted for every $3 you earn above a higher limit . However, starting the month you hit your full retirement age, your benefits are no longer reduced no matter how much you earn.
Again, any reduction in benefits due to the earnings test is only temporary. You receive the money back in the form of a recalculated higher benefit beginning at full retirement age, so don’t use the reduction as the sole reason to cut back on working or worrying about earning too much.
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Q When Should I Start Social Security Benefits
A. Timing is really important. Thats because the program rewards people for waiting to start their benefits. If you retire at what Social Security calls your full retirement age, youll get your full benefit.
In general, the longer you wait , the bigger your benefit. So if you can get by without Social Security for a while, waiting to start might be a good idea.
That said, sometimes it can make sense to start Social Security sooner rather than later. Someone might start earlier if he or she:
- Needs the payments to cover expenses right away
- Has serious health problems or a family history of shorter life spans
- Would rather take payments early and invest them
- Is the lower-earning spouse, while the higher earner continues to remain employed
Q Do My Social Security Decisions Affect My Spouses Benefits
A. Yes and vice versa. If youre married and full retirement age or older, youll receive either your own Social Security benefit or one-half of your spouses benefit, whichever is greater. This is known as spousal benefit.
This can be a good option if one spouse has earned a lot less than the other over the years.
Also, delaying Social Security can increase the benefits for a surviving spouse. When one spouse dies, the other can usually get the greater of his or her existing benefit or the deceased spouses benefit. So, if the higher earner waited to start their benefits until their FRA or later, their benefit will be that much higher for the surviving spouse.
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Calculating Average Indexed Monthly Earnings
The caveat to calculating an average of a workers highest 35 years of historical earnings is that in the distant past, earnings were typically lower not just because the worker might have been earlier in his/her career, but simply because inflation lifts average wages over time . For instance, the chart below is an example of one worker’s hypothetical historical earnings, with a high point in the early years but in general a slow upward trend to earnings over time.
Accordingly, when Social Security determines the 35-year average of earnings, it first inflation-adjusts those earnings into current dollars using the National Average Wage Index. Technically, this is done by inflation-indexing all historical earnings into a base year that was 2 years before the individual turned 62 and first became eligible for benefits. Thus, a 62-year-old in 2016 will have historical earnings inflation-adjusted to the 2014 wage index in general, Social Security benefits are indexed to wage levels 2 years before becoming eligible at age 62, which means indexed to the individuals age 60. This ensures that benefits based on historical average wage calculation isnt indirectly reduced simply due to the fact that wage inflation hadnt yet occurred in the past.
Once inflation-adjusted earnings have been calculated throughout all the working years, its possible to determine which were the highest 35 years of earnings that will be included in the Social Security benefits calculation .
How Social Security Works
The Social Security Administration uses a multi-step formula to calculate just how much any given American gets in benefits. Factors include marriage, lifetime contributions, work history and more. But the purpose is always the same: to make sure that everyone who works has a safety net for retirement. To understand just how important that is we have to recall how senior citizens lived before President Franklin Roosevelt’s administration invented this program.
Although precise measurement hadn’t yet begun, most estimates suggest that in 1934 approximately half of all seniors lived in poverty. Most estimates suggest that this figure would have changed little over the past 84 years without the Social Security program. Instead, by 1959 this figure had fallen to 35%. By the year 2000 only 1-in-10 seniors lived in poverty, a number that has stayed largely consistent to this day. In many very real ways, Social Security created the concept of retirement.
Of course, there’s still far to go. Nearly a third of seniors still live within 200% of the poverty line, and many more still struggle to pay their bills.
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How To Calculate Social Security Benefits
If youd just like a ballpark estimate of your benefit, the Social Security Administration offers a quick calculator to give you a sense of your potential benefit. This calculator simply asks for your current annual salary, your birth date and your projected retirement date, although it does allow you to fill in your actual income by year to get a more accurate estimate.
This estimate does not take early or late application for benefits, taxes and Medicare, or COLA increases into account. Youll likely need to download the Social Security Administrations full calculator software or work with a financial advisor to determine your full benefits considering those factors.
Knowing how much you can expect to receive in Social Security gives you an important piece of your retirement income puzzle. With that in hand, you can make the financial plans you need for a secure and fulfilling retirement.
When Would The Extra Money Appear In My Social Security Check
The COLA goes into effect with December benefits, which are paid in January 2023.
Social Security payments are made on Wednesdays, following a rollout schedule based on the beneficiary’s birth date: If you were born from the 1st through the 10th of the month, your benefits are paid on the second Wednesday of the month and any increase will appear in your Jan. 11 check.
If your birthday falls between the 11th and 20th of the month, your checks are paid on the third Wednesday, and you’ll see your first COLA increase on your Jan. 18 check.
Those born between the 21st and the end of the month receive benefits on the fourth Wednesday, which, in 2023, is Jan. 25.
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What If I Change My Mind
If you receive Social Security benefits at a reduced rate, but then change your mind, you have the option of withdrawing your application and paying back to the government what you’ve already received . Then, you could restart benefits at a later date to take advantage of a higher payout. But you are limited to one withdrawal per lifetime.
For example, let’s say you elected to receive early benefits at age 62, but then decided to go back to work at age 63. You could withdraw your Social Security application within the first 12 months of receiving benefits, pay back the years’ worth of benefits you received, go back to work, and then wait until a later age to restart your benefit checks at a higher level.
For important details about repaying benefits please read the SSA publication If You Change Your Mind.
Determine Your Primary Insurance Amount
To calculate your actual Social Security retirement amount, youll need to factor in something called bend points. These points are based on three separate percentages of your average indexed monthly earnings, set by law. For 2021, your PIA will be the total of:
- 90 percent of the first $996 of your earnings plus
- 32 percent of your average earnings between $996 and $6,002 plus
- 15 percent of your average earnings over $6,002
If the total above is not a multiplier of $.10, the SSA will round down the amount to the next-lowest multiplier of $.10. The SSA sets a maximum amount available to recipients each month, and this amount can vary from one year to the next. For 2021, someone filing at age 70 can receive up to $3,895 a month, while someone filing at full retirement age caps out at $3,148. If you begin filing at age 62 in 2021, your benefit may be reduced to as low as $2,203 per month.
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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.
Can Your Pia Change After You Reach Age 62
There are two things that affect your PIA after you reach age 62:
You may get the wrong answer when running your own calculations on when to begin Social Security if you simply take the numbers off your statement and do not properly apply inflation adjustments.
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How Social Security Is Calculated
The benefits you receive under Social Security differ based on several factors, not least of which include your work history, your collection status, and which type of benefit you collect. Note that, despite the language of retirement, this is the same formula used to calculate SSDI benefits.
As a result, the average disability benefit is less than the average retirement benefit as few disabled workers have as many eligibility years as long as their retired counterparts.
Base benefits are calculated as follows:
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.
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How Much Will My Spouse Receive
If your spouse qualifies for benefits on their own record, the SSA will pay that amount first. If the benefit on your record is higher, they will get an additional amount on your record so that the combination of benefits equals that higher amount.
If they begin receiving benefits:
- If your spouse is under full retirement age and:
- Works while receiving benefits, their benefits may be affected by the retirement earnings test.
- Also qualifies on their own record, their application will include both benefits.
More about spouse social security retirement benefits.
How Much Money Can You Make And Still Get Ssi 2022
Asked by: Zora Zboncak
If you are younger than full retirement age and earn more than the yearly earnings limit, we may reduce your benefit amount. If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2022, that limit is $19,560.
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Who Is Eligible For Social Security Benefits
Anyone who pays into Social Security for at least 40 calendar quarters is eligible for retirement benefits based on their earnings record. You are eligible for your full benefits once you reach full retirement age, which is either 66 and 67, depending on when you were born. But if you claim later than that – you can put it off as late as age 70 – youâll get a credit for doing so, with larger monthly benefits. Conversely, you can claim as early as age 62, but taking benefits before your full retirement age will result in the Social Security Administration docking your monthly benefits.
The bottom line: Youâre eligible for Social Security Benefits if youâve paid into the system for at least a decade, but your actual benefits will depend on what age â between 62 and 70 â you begin to claim them.