Your Options: Working Applying For Retirement Benefits Or Both
Choosing when to start receiving your Social Security retirement benefits is an important decision. Theres no one choice that works for everyone because your lifestyle, finances, and goals are not the same as others.
Do you want to retire early, stay on the job, or work beyond retirement age?
Should you start receiving retirement benefits now, or wait until you can receive a higher benefit amount?
These are important questions youll need to answer as you plan for your retirement. Consider the four options below to help you make the best decision.
How To Get A Social Security Card
How Credits Are Earned
Since 1978, when you work and pay Social Security taxes, you earn up to a maximum of four credits per year.
The amount of earnings it takes to earn a credit may change each year. In 2021, you earn one Social Security or Medicare credit for every $1,470 in covered earnings each year. You must earn $5,880 to get the maximum four credits for the year.
During your lifetime, you might earn more credits than the minimum number you need to be eligible for benefits. These extra credits do not increase your benefit amount. The average of your earnings over your working years, not the total number of credits you earn, determines how much your monthly payment will be when you receive benefits.
Read our publication, “How You Earn Credits,” for more information.
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Social Security Benefits For Workers Turning 60 In 2020 Will Very Likely Drop Due To The Coronavirus Pandemic
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.
How To Check Your Estimated Social Security Benefit
For a long time, the Social Security Administration sent annual updates to current and future Social Security beneficiaries, to fill them in on what their expected benefits are. However, the SSA no longer does that, and now requires those interested to check themselves.
For a long time, the Social Security Administration sent annual updates to current and future Social Security beneficiaries, to fill them in on what their expected benefits are.
However, the SSA no longer does that, and now requires those interested to check themselves.
WFAA recently demonstrated how to do exactly that- by signing up on Social Securitys website.
. Sign in, and itll tell you if you have worked enough already to eventually get a monthly benefit. The site will also reveal what your monthly payment is likely to be, based on your actual earnings history, the report says. You can also drag an interactive bar to see how much less you would get if you draw social security early at 62, versus waiting for the maximum payment you would get by waiting until youre 70 to tap Social Security. You can print your information or save it and come back every year to re-check.
Such an account also allows citizens to do various other things, including getting estimates for the benefits of their spouse, check their application status, and setting up direct deposit, their mailing address, and other information.
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How Long Can You Stay On Each Page
For security reasons, there are time limits for viewing each page. You will receive a warning if you dont do anything for 25 minutes, but you will be able to extend your time on the page.
After the third warning on a page, you must move to another page. If you do not, your time will run out and your work on that page will be lost.
Special Help For Retirees
A retiree can use the Tax Withholding Estimator to enter any pension income or Social Security benefits they or their spouse receive. The tool then automatically calculates the taxable portion and incorporates it into an overall estimate of their projected tax liability and withholding for the year. If a withholding change is needed, the retiree can choose a tax due of close to zero or a refund amount. The;tool will then link to Form W-4P, Withholding Certificate for Pension or Annuity Payments, and give the retiree a specific withholding recommendation based on the option chosen. It also gives instructions on how to fill in each line of the form.
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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.
When You Choose To Start Taking Social Security Benefits
The yearand even the month within that yearthat you choose to begin taking Social Security benefits affects how much you receive each month. You can start claiming Social Security benefits early as age 62, the current early retirement age. But you wont get your full PIA. Itll be reduced based on how many months you have until your full retirement age. This reduction can really add up, topping in at as high as 30% for particularly early claimers.
You can avoid these surcharges on your PIA, of course, simply by waiting to start payments until your full retirement age. This is generally between ages 66 and 67, depending on when you were born.
You can even add onto your base amount by delaying when you start benefits. After you reach full retirement age, you can boost your benefits by up to 8% of your PIA annually simply by not claiming Social Security. These benefit increases are known as delayed retirement credits, and you can accrue them up to age 70.
An important note: These benefit rate changes are performed to provide roughly the same cumulative benefit over a lifetime, assuming a roughly average lifespan. In other words, if you start Social Security earlier, youll probably claim it for longer; someone with the same lifespan who delayed payments would claim them for less time. To provide them the same total benefit, earlier payments must be smaller and later benefits have to be larger to catch up.
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When To Apply For Benefits How Much Youll Get
AARP, Updated April 19, 2021
All the information presented is for educational and resource purposes only. It is not intended to provide specific or investment advice.; We don’t guarantee the accuracy of the tool and suggest that you consult with your advisor regarding your individual situation.
How To Calculate Social Security Benefits In Excel
If you are in your late 50s and approaching retirement, you can create a useful model of your future benefits. It works best to do this in a Microsoft Excel spreadsheet, as follows:
- Using a recent Social Security statement, list in spreadsheet column A your taxable Social Security earnings year by year.
- List in column B the most recently published NAWI adjustment factors as published by the SSA.
- Multiply columns A and B and output the result to column C.
- Identify in column D the 35 highest values in column C. Add these together and divide the sum by 420 . This will approximate your AIME.
- Use the most recently published bend points to convert your AIME into a PIA.
You also can fill in hypothetical values for estimated taxable Social Security earnings in future years until you plan to stop working. To be conservative, use a NAWI adjustment factor of 1.0 in column B for all future years.
A financial advisor who fully understands this process can be helpful in verifying your calculations, advising you on when to start Social Security benefits, and estimating the future benefits you can expect to receive.
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Easily Estimate Your Social Security Income When You Retire
The collecting of social security benefits is a very important part of your retirement. In most cases, Americans have little idea as to how their benefits will be once they reach retirement age. Its important to know what factors are considered in determining your social security benefits.
The following factors will determine how your benefits will be calculated: earning history, work history, birth year, claiming age, total income, geographical location, and if you are still receiving an income. The Social Security administration has a number of tools that can help you get a ball park estimate of you monthly benefit amount.;
There Are A Few Tools You Can Use To Calculate Your Social Security Benefits Including Signing Up For A My Social Security Account
The best way to estimate your Social Security benefits is to sign up for a my Social Security account. The Social Security Administration used to mail benefit statements every five years to workers between the ages of 25 and 60 and then annually until they started taking benefits. But since 2011,;the agency has cut back on mailing statements. It now only sends paper statements to workers who are at least 60 years old and have not yet signed up for a my Social Security account. The statements are sent about three months before your birthday.
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For those who have an account, you will receive an email about three months before your birthday reminding you to review your online statement.;
The benefit estimate provided in the statement is based on your past earnings and a projection of your future income, which assumes your income will remain at the same level as the previous year until you retire. You could get more than the estimate if you end up earning more in the future or less if your income drops. The statement provides an estimate if you continue working until age 62, your full retirement age and age 70.;
The statement also includes an estimate for survivor benefits for your family and what you would receive each month if you became disabled and started taking disability benefits.;;
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Getting A Social Security Number For A New Baby
The easiest way to get a Social Security number for your child is at the hospital after they are born when you apply for your childs birth certificate. If you wait to apply for a number at a Social Security office, there may be delays while SSA verifies your childs birth certificate.
;Your child will need their own Social Security number so you can:
- Claim your child as a dependent on your income tax return
- Open a bank account in their name
- Get medical coverage for them
- Apply for government services for them
Keep your Social Security card in a safe place to protect yourself from identity theft.;
How Does The Calculator Estimate My Retirement Benefits Payment
Our simplified estimate is based on two main data points: your age and average earnings. Your retirement benefit is based on how much youve earned over your lifetime at jobs for which you paid Social Security taxes. Your monthly retirement benefit is based on your highest 35 years of salary history. You can get your earnings history from the Social Security Administration .
Your Social Security benefit also depends on how old you are when you take it. You can start collecting at age 62, the minimum retirement age, but youll get a bigger monthly payment if you wait until full retirement age, which is 66 but is gradually moving to 67 for people born in 1960 or after. If you can wait until 70 to start collecting, youll receive your maximum monthly benefit.;
A single person born in 1960 who has averaged a $50,000 salary, for example, would get $1,332 a month by retiring at 62 the earliest to start collecting. The same person would get $1,911 by waiting until age 67, full retirement age. And he or she would get $2,370, the maximum benefit on those earnings, by waiting until age 70. Payments dont increase if you wait to collect past 70.
Other factors affecting the size of your benefit include whether youve worked for state or local government for more than 10 years; your Social Security payment may be decreased if you paid into the civil service retirement program, for example.
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Number Of Credits Needed For Survivors Benefits
The number of credits needed for family members to be eligible for survivors benefits depends on your age when you die. The younger you are, the fewer credits needed. Nobody needs more than 40 credits.
Under a special rule, we can pay benefits to your children and your spouse caring for your children, even if your record doesn’t have the number of credits needed. They can get benefits if you have credits for one and one-half year’s work in the three years before your death.
If you are already receiving retirement or disability benefits at the time of your death, we will pay your survivors based on that entitlement. We will not have to determine your credits again.
Can I Use The Calculator To Figure Out Social Security Disability Insurance And Supplemental Security Income
No. SSDI is aimed at people who cant work because they have a medical condition expected to last a year or more or result in death. Your SSDI benefits last only as long as you suffer from a significant medical impairment while not earning significant other income.
SSI is a separate program for people with little or no income or assets who are 65 or older, as well as for those of any age, including children, who are blind or who have disabilities. The maximum monthly SSI payment for 2021 is $794 for a single person and $1,191 for a couple. But some states add to that payment, and you may receive less than the maximum if you or your family has other income. Get more information about SSDI and SSI from the Social Security Administration.
Also of Interest
List Each Year’s Earnings
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 Your Primary Insurance Amount Is Calculated
Once you have your AIME, you can calculate your primary insurance amount , the base rate for your Social Security payments. The PIA calculation relies on so-called bend points that determine how much of your income will be replaced by Social Security benefits in retirement.
Think of bend points as similar to tax brackets, in that they determine a percentage of your benefits based on incremental buckets of earnings. There are three bend point buckets: one for 90% of income replacement, one for 32% and one for 15%.
These bend point buckets help give lower lifetime earners a higher percentage of income replacement, and higher lifetime earners a lower rate of income replacement, says Jim Blankenship, certified financial planner and author of A Social Security Owners Manual.
The dollar amounts of bend points are adjusted for inflation each year, but the percentages of each bend point are set by law and remain unchanged. AIME amounts are always rounded down to the nearest $0.10. For 2021, the bend points are:
90% of the first $996 of your AIME, plus
32% of your AIME between $996 and $6,002, plus
15% of your AIME over $6,002
For a worker with an AIME of $6,250, the calculation would look like this:
90% of $966 = $896.40, plus
32% of $5,006 = $1,601.92, rounded down to $1,601.90, plus
15% of $248 = $37.20
This worker would earn a monthly Social Security benefit of $2,535.50 .
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