Thursday, May 19, 2022

How To Calculate Your Social Security Pension

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Are There Retirement Benefits For My Family Members

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Once you start collecting Social Security, other family members may be entitled to collect benefits as well, based on your work history. If youve been married for at least one year, your spouse may be entitled to collect spousal benefits. Under certain conditions, your children may also be entitled to benefits.

There is a limit on the amount of benefits that family members receive on the earnings record of one worker. The limit varies between 150% and 188% of the workers PIA. If the total benefits owed to your spouse and children push your familys benefits above the limit, their benefits will be reduced proportionately to bring the total within the limit. Your benefits will not be affected. Any benefits payable to an ex-spouse arent included in the family maximum.

Social Security Benefits For Workers Turning 60 In 2020 Will Very Likely Drop Due To The Coronavirus Pandemic

Congress could pass legislation that would prevent this outcome.

As a result of the COVID-19 pandemic, about 3 million retired workers who turn 60 years old in 2020 will very likely have much lower lifetime Social Security benefits than previously expected. Without legislative changes, the average earner stands to lose nearly $1,500 per year for the rest of their life. Fortunately, there is a simple legislative changeexplored in detail belowthat would fix these problems without lowering the benefits of any other cohort of retirees. Chairman of the U.S. House Ways and Means Social Security Subcommittee, Rep. John Larson , has introduced such legislation*and Congress should fix this situation as soon as possible.

Other Sources Of Retirement Income

Home Equity and Real Estate

For some people in certain scenarios, preexisting mortgages and ownership of real estate can be liquidated for disposable income during retirement through a reverse mortgage. A reverse mortgage is just as it is aptly named â a reversing of a mortgage where at the end , ownership of the house is transferred to whoever bought the reverse mortgage. In other words, retirees are paid to live in their homes until a fixed point in the future, where ownership of the home is finally transferred.

Annuities

A common way to receive income in retirement is through the use of an annuity, which is a fixed sum of periodic cash flows typically distributed for the rest of an annuitant’s life. There are two types of annuities: immediate and deferred. Immediate annuities are upfront premiums paid which release payments from the principal starting as early as the next month. Deferred annuities are annuities with two phases. The first phase is the accumulation or deferral phase, during which a person contributes money to the account . The second phase is the distribution, or annuitization phase, during which a person will receive periodic payments until death. For more information, it may be worth checking out our Annuity Calculator or Annuity Payout Calculator to determine whether annuities could be a viable option for your retirement.

Passive Income

Inheritance

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Tax Considerations For Social Security Benefits

How do these tax considerations affect when you should apply for Social Security benefits? At todays , they may not have much of an impact on most people. Still, tax rates and income thresholds can change, so its worth remembering that you will lose less of your Social Security to taxes if you are in a lower marginal tax bracket when you begin to collect.

You should also note that if you decide to return to work, even part-time, and arent yet at your FRA, your Social Security benefits may be temporarily reduced. The reduction is $1 for every $2 of earned income over $18,960 in 2021 . During the year when you reach your FRA, your benefits will be reduced by $1 for every $3 in income over $50,520 in 2021 until the month when you become fully eligible. That money isnt lost, however. The SSA will credit it to your record when you reach your FRA, resulting in a higher benefit.

How Does The Calculator Estimate My Pension Payment

Social Security: There is a Better Way

Our simplified estimate is based on two main data points: your age and your average income. Your retirement pension is based on how much youve earned throughout your life from jobs that paid Social Security taxes. Your monthly retirement pension is based on your highest 35-year salary history. You can get your income history from the Social Security Administration .

Your Social Security benefit also depends on how old you are when you draw it. You can start collecting at age 62, the minimum retirement age, but you get a higher monthly payment if you wait until full retirement age, which is 66 but gradually increases for people born in 1960 or later 67 increased. If you can wait until age 70 to start earning, you will receive your maximum monthly benefit.

For example, a single person born in 1960 with an average salary of $50,000 would make $1,349 a month by the time they retire at 62 the earliest time to start collecting. The same person would get $1,927 if they waited until age 67, the full retirement age. And he or she would receive $2,389, the maximum benefit on those earnings, if he or she waits until age 70. Payments dont increase if you wait until youre over 70.

Other factors that affect the amount of your benefit are whether you have worked for state or local government for more than 10 years For example, your Social Security contributions may be reduced if you have paid into the public sector pension scheme.

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Fact #: Most Elderly Beneficiaries Rely On Social Security For The Majority Of Their Income

Social Security provides the majority of income to most elderly Americans. For about half of seniors, it provides at least 50 percent of their income, and for about 1 in 4 seniors, it provides at least 90 percent of income, across multiple surveys and the study that matches survey and administrative data.

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

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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Adjust Your Primary Insurance Amount If You Claim Benefits Before Or After Full Retirement Age

All the above calculations determine the primary insurance amount if you claim benefits at full retirement age — but you may decide to claim benefits before or after FRA. You can claim benefits as early as age 62. But if you claim benefits before FRA, your benefits are decreased by:

  • 5/9 of 1% per month for each month prior to FRA for the first 36 months
  • 5/12 of 1% per month for each additional month if you claim more than 36 months before FRA

If you claim benefits after FRA, benefits are increased by 2/3 of 1% for each month you wait up until age 70.

The table below shows FRA depending on your birth year:

If You Were Born inYour FRA Is

Table source: Social Security Administration.

Depending when your FRA is, you’d apply the benefits reduction or increase to your primary insurance amount. For example:

  • If FRA is 67 and you claim benefits at 66, that’s 12 months early. Multiply the per month-reduction *.01) times 12 months to see that benefits are reduced by around 6.7%.
  • If FRA is 66 and you claim benefits at 62, that’s 48 months early. Multiply the per month-reduction for the first 36-months *.01) times 36 months + the additional reduction of *.01) times 12 months. This gives you 0.20 + 0.05, which amounts to a 25% reduction in your primary insurance amount.
  • If FRA is 67 and you claim benefits at 69, that’s 24 months late. Multiply the per-month increase *.01) times 24 months to see benefits are increased by 16%.

What Is A Social Security Card

Social Security Retirement – How Your Benefits Are Calculated

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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How Are Spousal Benefits Calculated For Social Security For Married People

If someone is married to a worker eligible for Social Security benefits, they may be able to claim spousal benefits based on their worker spouses earnings. Social Security spousal benefits are based on the worker spouses earnings and the age of the claiming spouse. Note that spousal benefits do not in any way decrease your spouses retirement benefit.

To qualify for Social Security spousal benefits:

  • Both the higher-earning worker and the claiming spouse must be at least 62
  • The couple must have been married for at least one year
  • The higher-earning worker spouse must already be receiving their earned benefit

Depending on the age that the spouse claims, the benefits can range between 32.5%-50% of the worker spouses primary insurance amount . As with earned benefits, youll receive less than the full spousal benefit if you decide to claim before your full retirement age. But unlike earned benefits, you dont receive more if you wait to claim spousal past full retirement age. In fact youll actually be forfeiting some money by waiting longer.

If only one spouse worked, then the Social Security Administration calculates half of the worker spouses PIA and adjusts it based on the age of the claiming spouse.

What Income Reduces Social Security Benefits

If you start taking Social Security benefits before you reach full retirement age, any income you earn over the annual limit until you reach full retirement age will lower your benefit eligibility for that year. In 2021, if you are retired and haven’t reached full retirement age, the SSA will deduct $1 from your benefits for every $2 earned over $18,960. In the year you reach full retirement age, the SSA will deduct $1 for every $3 earned over $50,520. For the 2022 tax year, these thresholds are slightly higher, at $19,560 and $51,960, respectively.

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Will My Medicare Coverage Be Affected By The Social Security Double

No although your Social Security benefits may be reduced by these two provisions, your coverage will not be affected. If you believe that, based on your age and/or amount of creditable service with the MTRS, you are exempt from either the Windfall Elimination Provision or the Government Pension Offset, the Social Security Administration will require you to submit a letter from us that states the date on which you met the eligibility requirement. To request this letter,

How Much To Save For Retirement

The Best Age to Begin Collecting Social Security ...

Naturally, the next question becomes: how much should a person save for retirement? Simply put, it’s an extremely loaded question with very few definite answers. Similar to the answer to the question of whether to retire or not, it will depend on each person, and factors such as how much income will be needed, entitlement for Social Security retirement benefits, health and life expectancy, personal preferences regarding inheritances, and many other things.

Below are some general guidelines.

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When Can I Start Collecting Social Security

The minimum age to claim benefits is 62. If you are turning 62 and need the income from Social Security to support yourself, then you can start claiming your benefits now. However, if you have enough other income to keep you going until you are older, you may want to delay increasing the size of your monthly benefit.

Do You Plan To Continue Working In Your 60s

Working in your 60s will help you maximize your income and savings.

Your benefits are based on your highest 35 years of earnings. Each year of work can add higher earnings to your record by replacing years with low earnings such as those when you were a student, were unemployed, or took time off to care for someone. When you work and wait to claim until age 70, you can increase your monthly benefit by more than 75 percent! Working in your 60s also gives you more time to save on your own for retirement.Review your earnings record on my SocialSecurity.

Working in your 60s will help you maximize your income and savings.

Your benefits are based on your highest 35 years of earnings. Each year of work can add higher earnings to your record by replacing years with low earnings such as those when you were a student, were unemployed, or took time off to care for someone. When you work and wait to claim until age 70, you can increase your monthly benefit by more than 75 percent! Working in your 60s also gives you more time to save on your own for retirement.Review your earnings record on my SocialSecurity.

You can maximize your benefits even if you work fewer hours or stop working.

You can maximize your benefits even if you work fewer hours or stop working.

Consider working in your 60s for an extra boost to your income and savings.

Consider working extra years in your 60s for an extra boost to your income and savings

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Know Your Social Security Full Retirement Age

First things first:Determine your Social Security full retirement age. For people born between 1943 and 1954, full retirement age is 66. If your birthday falls between 1955 and 1959, it gradually climbs to 67. If you are born in 1960 or later, your full retirement age is 67.

You can claim your Social Security benefits a few years before or after your full retirement age, and your monthly benefit amount will vary as a result. More on that in a moment.

How To Calculate My Social Security Benefits

4 Simple Steps to Calculating Your Social Security Benefit: Educator Edition

You can use the Money Help Center calculator to determine how much Social Security you will get and how income tax may impact your benefits and income. You need to plan for retirement by considering how you will be taxed once your working life ends. You dont want to get an unpleasant surprise when you start earning your retirement income or getting your benefits and realize it is less than you expected because of tax withdrawals.

At the same time, Social Security can be a smart part of your retirement plan. Even if you are taxed at the highest level, you may still benefit. After all, from virtually any other source of income, 100% of your wages and income will be taxed after retirement. Dollar for dollar, Social Security retirement benefits can still be a better deal as far as taxation, than other sources of retirement.

As you plan for your golden years, it is important to keep in mind all the sources of income you may have once you finish working. Plan ahead and consider the tax impact on your income as well as any tax advantages you can secure today while saving for retirement. Use the Money Help Center calculators to help you plan. Our calculators are free, have no bias and never ask you for your personal information, such as contact information or e-mail address. You can use them at any time and instantly get information to help you plan for your financial future.

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How Much Social Security Will You Get When You Retire

The amount of your Social Security benefit is a function of your full retirement age. If you were born in 1960 or after, your normal retirement age when you are eligible to receive full or unreduced Social Security benefits is 67. When you choose to retire is central to your retirement planning strategy because it activates your various streams of retirement income: drawing upon Social Security and your pension, if you have one, as well as beginning withdrawals from your other retirement accounts, such as your 401 or IRA, and other possible income sources like annuities. With the right planning, you may be able to retire early and depend on alternative sources of retirement income until you reach your normal retirement age, at which point you can start collecting your full Social Security benefits. You also can increase your Social Security benefit amount by waiting beyond your full retirement age to retire. However, the benefit increase stops when you reach age 70. Access my Social Security Retirement Calculator to learn more.

Our Retirement Savings Calculator gives you the option of including your Social Security benefits in its calculations to determine if you have enough funds to retire. Discover how early retirement can affect your Social Security benefits and the truth behind some common Social Security myths.

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