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.
Exceptions To The Usual Schedule
Your payment will arrive on an alternate schedule if you fall into certain categories. It will be made on the third day of the month if:
- Your state is paying your Medicare premiums.
- You started receiving benefits prior to May 1, 1997.
- You reside in another country.
- You’re receiving both Social Security benefits and SSI payments.
But there’s an exception to the Social Security/SSI rule as well. You’ll receive payment on the first of the month rather than the third day if you’re receiving SSI due to disability, blindness, or age.
SSI is needs-based. It’s not something you paid into over the course of your working career, like Social Security retirement or disability benefits or Medicare, so it’s possible to collect for these reasons without also receiving Social Security retirement or disability benefits. SSI is intended to pay for basic food, shelter, and clothing needs.
Your payment will come the weekday just before the usual date if your payment date falls on a weekend or a federal holiday.
You can find calendars on the Social Security Administration’s website, Schedule of Social Security Benefit Payments 2021, to pin down the exact dates in 2021 depending on your circumstances.
Congress Must Act Sooner Rather Than Later
In theory, the AWI problem could be fixed anytime before 2022, when, for example, workers who turn 60 this year are first eligible to retire at the age of 62. But that delay would cause significant anxiety for these workers, whose future benefits would be at risk. Moreover, people decide when to retire based on projections of their incomes in their initial year of retirement and in the remainder of their lives. It would be most unfair to workers decision-making processes to have the expectations of their future incomes be uncertain for some period of time while they are trying to make such an important decision.
Congress needs to act sooner rather than later to ameliorate this problem. One possibility would be to include a fix in the stimulus legislation to cope with the economic effects of the COVID-19 pandemic that Congress is currently considering.
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How Cola Increases Evolved Over Time
Each year, the SSA announces any increases to Social Security benefits, known as COLA, to help recipients keep up with rising prices. The increases are tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers , which is the official measure of the monthly price change in goods and services. Annually, the SSA compares the CPI-W for the third quarter of the previous year and current year to determine the COLA increase.
While COLA adjustments are now automatic, this was not always the case. Beneficiaries received their first COLA adjustment in October 1950. A second increase was made in September 1952 through legislation. For the next 20 years, recipients only saw their benefits increase if Congress approved it.
In 1972, Congress passed legislation to provide automatic increases linked to a rise in consumer prices. Recipients would no longer have to wait for Congress to take action to receive an increase. The first automatic increases to Social Security benefits took effect in 1975. After 1982, COLA adjustments were effective for December of each year and received by beneficiaries in January.
Here is a history of COLA increases from 1975 to 2021:
|Social Security Cost-Of-Living Adjustments|
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.
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How To Stop Social Security Check Payments
The SSA can not pay benefits for the month of a recipients death. That means if the person died in July, the check received in August must be returned. Find out how to return a check to the SSA.
If the payment is by direct deposit, notify the financial institution as soon as possible so it can return any payments received after death. For more about the requirement to return benefits for the month of a beneficiarys death, see the top of page 11 of this SSA publication.
Family members may be eligible for Social Security survivors benefits when a person getting benefits dies. Visit the SSA’s Survivors Benefits page to learn more.
The Source Ofand Solution Tothe Problem
When the current Social Security formula was put in place in 1977, no provision was made for the contingency that economic conditions would be so dire that average wages would fall in any given year. This problem first surfaced in 2009 during the Great Recession. The AWI, however, fell by a relatively small amount, and policymakers chose not to do anything about it. As a result of the COVID-19 pandemic, however, the decline in the AWI is likely to be about four times as big now as it was during the Great Recession.
There is ample precedent for fixing this problem. The first precedent concerns Social Security cost-of-living allowances . As mentioned above, payments in years after beneficiaries first year of retirement are indexed to inflation using a version of the consumer price index . However, under the law, if prices fall in any year, benefits are not adjusted downward rather, they remain the same. The second precedent concerns the Social Security contribution and benefit base, also known as the taxable maximum. The taxable maximum is the dollar amount of annual earnings above which the Social Security payroll tax does not apply. The taxable maximum is indexed to the AWIbut like COLAs, it is never adjusted downward.
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How Social Security Approval Works
When you retire, a lot of questions cross your mind. The one question that almost every retiree asks is: how long does it take to get my first social security check? It would be prudent to start by knowing how long does it take to apply for social security online. To your relief, the process will not take a lot of your time. Now that your application is done and submitted, you will be wondering how long does it take to get social security approval.
Typically, it takes 6 weeks to process your application and for the benefits to start. However, it will take longer if you submit incorrect information. Also, the duration for approval will depend on the number of submissions the Social Security Administration will be processing at the time. Overall, the wait time is at least six weeks or longer depending on a number of factors.
You will require your social security number, birth certificate, and supporting financial documents when you apply. Tax return evidence and W-2 forms are also required for self-employed applicants.
For those born out of the USA, you should provide proof of citizenship. A certificate of citizenship or passport will be adequate. Also, marital information and those of your children will be required.
Luckily, all these documents are not required at once when you apply. The SSA will send you notification when they are required.
Determining Your Best Benefit Options
Exemptions for Documentation
Other Ways To Use My Social Security Account
Once youve begun receiving Social Security payments, you can use your online account to change your address, establish and change your direct deposit, and update your personal information. Do you have more social security questions? If so, our team is here to help. Contact a Dowling & Yahnke advisor to plan your financial future today.
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How Do You Check The Status Of Social Security Payments
You can check the status of Social Security payments online through services provided by the Social Security Administration’s website. After applying for benefits, visit the Social Security website, and register for the My Social Security account to check the status of payments.
To view Social Security statements, visit the Social Security Administration’s website, and click Sign In or Create an Account. Select Create an Account on the subsequent page, and follow the instructions provided. You must verify information by providing your Social Security number, date of birth, email address and mailing address.
After verifying the information, enter your username and password on the login screen to sign into your Social Security account. This online dashboard provides all the pertinent information associated with your Social Security benefits, including detailed statements and payment receipts. You can view the status of your application and payments at any time through this online service.
You can also appeal a previously rendered decision through your online account. In addition to viewing your payment status online, you can also contact the Social Security Administration by telephone, regular mail or by visiting your local Social Security office. Contact information associated with the Social Security office is located on the Social Security Administration’s website.
Why Should I Check My Statement
A discrepancy in your earnings not only can affect your future benefits, but it can also raise a flag about possible identity theft. If earnings are much higher than your records show, it could indicate that someone has been working illegally using your Social Security number.
Statements also help you plan for retirement. You can see how much you can expect to receive in monthly benefits, and how much more you would get until your full retirement age, rather than collecting benefits at age 62. For most people born in 1960 or later, their full retirement age is 67. And if you delay taking your benefits until age 70, your monthly payments will be even higher.
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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.
Check Your Benefit Estimate Too
Checking your estimated Social Security benefit on your statement is another useful exercise, according to Czarnowski.
At one time, Social Security only informed you what your estimated benefit would be at three different ages: 62, your full retirement age and 72. The new statement is much more useful. It provides estimates of your monthly benefit at each age, from 62 to 70, including your full retirement age.
People have a better sense of what they can get from Social Security at different ages, said Czarnowski.
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What If My Payment Doesn’t Come
Contact the Social Security Administration at 1-800-772-1213 or find a Social Security office near you if your direct deposit or debit card funds aren’t made on time. The SSA asks that you wait three days before reaching out to them, however.
The risk of your “check” being stolen is virtually eliminated if you use the Direct Deposit option because the money is transmitted electronically and directly to your bank account.
Social Security Statement And Estimate Of Your Social Security Benefits
You may also request a Social Security Statement by mail. Fill out Form SSA-7004 to request your statement. Download the form on the SSA website, contact your local SSA field office, or contact Social Securitys general information number at 1-800-772-1213.
A Social Security Statement is a report of earnings or self-employment income SSA has credited to your earnings record. SSA uses the information to estimate future Social Security retirement benefits, current or future Social Security disability insurance, or survivor benefits you may be able to claim.
Review your Social Security Statement regularly. Its your responsibility. If all your earnings dont appear on the statement, contact SSA and inquire how to correct the record. You have a relatively short time period to correct the earnings record according to law:
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Are Social Security Benefits Taxable
If you have a lot of income from other sources, up to 85% of your Social Security benefits will be considered taxable income. If the combination of your Social Security benefits and other income is below $25,000, your benefits wonât be taxed at all. The amount of your benefits that is subject to taxes is calculated on a sliding scale based on your income. Money that Social Security recipients pay in income taxes on their benefits goes back into funding Social Security and Medicare.
If your retirement income is high enough that your benefits are taxable, how do you pay those benefits? You can ask Social Security for an IRS Voluntary Withholding Request Form if youâd like the government to withhold taxes from your Social Security benefits. Otherwise, youâre expected to file quarterly tax returns to pay these taxes over the course of the year.
That covers federal income taxes. What about state income taxes? That depends. In 13 states, your Social Security benefits will be taxed as income, either in whole or in part the remaining states do not tax Social Security income.
How Do Benefits Work And How Can I Qualify
While you work, you pay Social Security taxes. This tax money goes into a trust fund that pays benefits to:
Those who are currently retired
To people with disabilities
To the surviving spouses and children of workers who have died
Each year you work, youll get credits to help you become eligible for benefits when its time for you to retire. Find all the benefits Social Security Administration offers.
There are four main types of benefits that the SSA offers:
Learn about earning limits if you plan to work while receiving Social Security benefits
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Reduction For Disability Payments From Other Sources
If you receive disability benefits from a private source, like a private pension or private insurance benefits, these benefits will not affect your SSDI benefits. If, however, you receive other public disability benefits, they may affect your SSDI benefits. For instance, if you were injured on the job and are receiving workers’ compensation benefits, the amount of SSDI benefits you receive might be reduced.
Other disability benefits that are not job-related and are paid for by the federal, state, or local government may also reduce your SSDI benefit amount. Examples of these include temporary disability benefits paid by the state, military disability benefits, and state or local government retirement benefits that are based on disability. Some public benefits are not counted toward the 80%, including SSI or VA benefits.
The combined total amounts you receive from SSDI and all other public disability benefits cannot be more than 80% of the average amount you earned before you became disabled. If the amount is more than 80% of what your average earnings were before you became disabled, in most states, the excess amount is deducted from your SSDI benefits.
The interaction between workers’ compensation and SSDI can be complicated and varies depending on what state you live in. If you qualify for more than one public disability benefit, you may want to speak with an attorney to make sure you do not miss out on any benefits you are entitled to.
Where Can I Find My Social Security Number
A Social Security number is a nine-digit number that is generally issued to U.S. citizens, lawful permanent residents, and certain nonimmigrants. The Social Security Administration issues the number to track individuals employment for Social Security benefits. However, over time, the SSN has become a de facto national identification number for taxation and other purposes. Its also a common component on U.S. Citizenship and Immigration Services forms.