Wednesday, August 10, 2022

How To Estimate My Social Security Benefits

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Congress Must Act Sooner Rather Than Later

Social Security Delayed Benefits

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.

When To Start Your Retirement Benefits

It is always a good idea to wait as long as possible to start your retirement benefits. The longer you wait, the higher your benefit amount will be. If you start your benefits before full retirement age , then you will see a fairly significant reduction in your benefits. If you can wait until age 70, then you can see an increase in your benefit amount. There is no reason to wait past age 70 as your benefit increases will stop there. So, you should decide when to start your benefits based on your own personal financial situation. If you are unsure, then you should talk to a financial planner to help you make that decision.

How Do I Estimate My Monthly Retirement Benefits

You can estimate your monthly retirement benefits by calculating your PIA, the monthly benefit youre eligible to receive once you reach your FRA. To determine your PIA, the Social Security Administration uses your best 35 years of employment to arrive at your Average Indexed Monthly Earnings . If you havent worked for 35 years, some of the included earnings may be zero.

If you continue working after reaching your FRA, the SSA will automatically recalculate your benefits each year you continue to work. If your current income is greater than any of your previously calculated best 35 years, your benefits will be adjusted upward. The increase generally will be made in October of the following year but will be retroactive to January 1.

Social Security retirement benefits are automatically modified each year for cost-of-living adjustments , which are either positive or zero never negative. COLAs are based on the Consumer Price Index and have averaged between 1% and 2% over the past 10 years.

For more information, the SSA offers a helpful Social Security retirement calculator.

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Calculate My Social Security Income

These days thereâs a lot of doom and gloom about Social Securityâs solvency – or lack thereof. And regardless of whether you think Social Securityâs future is secure, the fact remains that you shouldnât plan on living exclusively off your Social Security benefits. After all, Social Security wasnât designed to make up a retireeâs entire income.

Still, many people do find themselves in the position of having to live off their Social Security checks. And even if you have other income sources in retirement, Social Security can make up a significant part of your retirement income plan. That’s why itâs important to know all the rules surrounding eligibility, benefit amounts, taxation and more.

Do you need help managing your retirement savings? To find a financial advisor near you, try our free online matching tool.

When Should I Start Collecting Social Security

Free Social Security Calculator Tool: Estimate Your Benefits â My Money ...

Ultimately, the decision of when to begin collecting Social Security is one you have to make. It depends on your age, your health status, how much you spend and how much you have saved. Its generally best to start collecting as late as you can, because you get a larger monthly payment, which is adjusted for inflation each year.

Consider a retiree who was born in 1950 and averaged $50,000 a year in salary. If she has $3,000 a month in expenses, her Social Security check would cover 48 percent of her expenses if she started Social Security at age 62. If she waited till age 70, her check would cover 84 percent of her expenses. Every year she delays retirement, her Social Security payout which is adjusted annually for inflation rises by about $1,635.

Traditionally, the retirement system in the U.S. has been a three-legged stool: Social Security, savings and pensions. Social Security was never intended to be the sole source of income for retirement. Increasingly, however, employers have been moving away from their employer-sponsored pension plans in favor of tax-deferred retirement savings accounts, such as 401 plans.

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When Is It Worthwhile To Continue Working While On Social Security For Higher Benefits

In the end, whether or how beneficial it is to continue to work while on Social Security in order to generate higher Social Security benefits in the future depends heavily on two factors: what income replacement tier the Social Security recipient will be in and what the existing earnings history already was . Similar to the consequences of retiring early , the consequences vary depending on where the individual is in the AIME calculation.

How Much Social Security Will I Get In Retirement

The amount of your monthly Social Security retirement benefit depends on multiple factors, including how much you earn over your working life, how old you are when you retire and allowances for inflation. Understanding how the payment is calculated can help you estimate what to expect and better position yourself to plan for retirement. Here’s how it works.

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Will A Government Pension Impact My Retirement Benefits

If you worked for an employer that didnt withhold FICA taxes from your salary, such as a government agency, the pension you receive based on that work may reduce your Social Security retirement benefits. This reduction, as part of the windfall elimination provision , affects individuals who earned a pension in any job where FICA taxes werent paid and who worked in other jobs long enough to qualify for Social Security retirement benefits.

In addition to a reduction in individual benefits, spousal and/or survivor benefits may also be reduced accordingly. In this case, Social Security benefits will be reduced by two-thirds of the government pension.

List Each Year’s Earnings

6% COLA Raise for Social Security, SSDI, SSI & VA Benefits in 2022

Your earnings history is shown on your Social Security statement, which you can now obtain online.

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.

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Social Security For The Disabled

People who are disabled, are dependents of retired or disabled workers, or are surviving spouses/children may also receive benefits. Note that this is supplementary information and that the Social Security Calculator only provides calculations for retirement benefits.

The SSA’s definition of disability refers to total disability, so partial or short-term disabilities are not qualified for benefits. Under the SSA’s rules, a person is disabled only if they meet all of the following conditions:

  • They cannot do work they did before
  • The SSA decides that they cannot adjust to other work because of their medical condition
  • The disability has lasted or is expected to last at least one year or to result in death

Benefits usually continue until beneficiaries are able to work again. Disability beneficiaries that reach full retirement age will have their benefits converted into retirement benefits, with the amount remaining the same. It is against the law to receive both disability and retirement benefits at the same time.

Social Security Disability Insurance

Supplemental Security Income

In some situations, it is possible to receive both SSDI and SSI. This usually happens when a qualified application for SSDI is granted low enough an SSDI benefit to make the applicant also eligible for SSI.

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:

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The Value Is Even Higher For Married Couples

You might be shocked to learn that it’s not uncommon for benefits to be worth more than a million bucks for a married couple.

Take a couple who were both born in 1950. They each worked and earned decent wages. His benefit at full retirement age will be $2,668 a month. Hers will be $1,659 a month at full retirement age.

If they each claim their own benefit at their full retirement age, and he lives to age 85 and she lives to age 90, the present value of their lifetime benefits works out to about $941,000.

It used to be that he could file and suspend his benefit at age 66, thus allowing her to claim a spousal benefit. She would be able to claim a spousal benefit for four years, then switch to her own benefit when she reached age 70. He would begin his benefit at age 70. In this way, they could both get the delayed retirement credits that would allow them to collect the maximum monthly benefit amount.

But the Social Security Administration changed the rules for this file-and-suspend strategy, effective 2015. Now, when one individual suspends benefits, their spouse’s benefits are also suspended. This claiming strategy would have boosted the present value of their lifetime benefits to $1,057,000 back in the day.

These present value numbers were calculated using a for-fee online Social Security calculator called Social Security Timing. They assume a 2% annual increase in benefits due to inflation and a 5% discount rate, or rate of return that the lump sum would have to earn.

How Much Will I Get From Social Security

How to Access Your Social Security Benefits Statement

Your retirement benefit is based on your lifetime earnings in work in which you paid Social Security taxes. Higher income translates to a bigger benefit . The amount you are entitled to is modified by other factors, most crucially the age at which you claim benefits.

For reference, the estimated average Social Security retirement benefit in 2022 is $1,657 a month. The maximum benefit the most an individual retiree can get is $3,345 a month for someone who files for Social Security in 2022 at full retirement age , the age at which you qualify for 100 percent of the benefit calculated from your earnings history. FRA is 66 and 2 months for people born in 1955, 66 and 4 months for people born in 1956, and is gradually rising to 67 for those born in 1960 or later.

Youll only know your own amount for sure when you apply, but there are ways to get a sense of it in advance. The quickest and easiest is to use AARPs Social Security Benefits Calculator or check your online My Social Security account. The latter draws on your earnings record on file with the Social Security Administration for the AARP calculator, youll need to provide your average annual income.

Keep in mind

Social Security sets a cap on how much of your income it takes into account in figuring your benefit. In 2022 the cap is $147,000 . Any income above that is not counted in your benefit calculation .

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Cost Of Living Adjustments

SSA has considered the fact that each year, we will have some inflation. It simply costs more to live each year as food, gas and housing prices rise. The cost of living is therefore adjusted each year in 2019, SSA had their biggest increase ever, with a 2.8% Cost of Living Adjustment, or COLA.This big increase shouldnt fool savvy Americans, however increases in Medicare could wipe out all the gains to retirees.

Determine the Effect of COLAs

Your years of earnings will work harder for you, and youll get a greater net amount from COLA if you retire later. Putting off retirement for additional years andespeciallywaiting till full retirement age is the best option if you can manage it.If you reach full retirement age, you have no limit on your Social Security earnings, but if you retire early, there are limits. For example, the SSA earnings limit for people turning 66 in 2019 will increase to $46,920.COLA exists to make sure that the power of retirement and Supplemental Security Income benefits will persist as inflation rises.COLA is specifically based on the percentage increase in the Consumer Price Index or CPI for Urban Wage Earners and Clerical Workers from the third quarter of the prior year. Therefore, COLA fluctuates from year to year.The CPI-W is the official measure SSA uses to come up with COLA, and the CPI comes directly from the U.S. Department of Labor.

Explore How The Age You Start Collecting Social Security Affects Your Retirement Benefits

The calculator bases your benefit estimate on current formulas from the Social Security Administration. Your answers are anonymous. Because we do not access or use your Social Security earnings record, these are rough estimates.

Your estimated benefits:

Select claiming ages on the graph to see how your estimated benefit changes.

Claiming at age Age 67 is your full benefit claiming age.

Compared to claiming at your full benefit claiming age.

Social Security retirement benefits are not designed to be your sole source of retirement income, but waiting even one month will increase your benefits.

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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

Social Security Benefits Will Be Even Higher In 2023 Here’s How Much You Could Get

Social Security Benefits Software Example 3262 Income Tax Preparation & Law 2021-2022

If the consumer-price index continues to climb, beneficiaries will see a record bump in their check next year.

Dan Avery


Dan is a writer on CNET’s How-To team. His byline has appeared in Newsweek, NBC News, The New York Times, Architectural Digest, The Daily Mail and elsewhere. He is a crossword junkie and is interested in the intersection of tech and marginalized communities.

Americans who receive Social Security benefits got their biggest boost in nearly four decades this year, thanks to soaring inflation: The Cost of Living Adjustment, or COLA, increased payments by 5.9% in January 2022, or about $93 a month for the average recipient.

But analysts predict next year’s increase will be even bigger for the nearly 70 million Americans who receive Social Security.

The average beneficiary could see between $120 and $180 more a month in Social Security checks, according to the Committee for a Responsible Federal Budget, a nonpartisan think thank. This year’s bump raised the average benefit for a retired worker to $1,657 per month, according to the Social Security Administration.

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How To Calculate The Marginal Social Security Benefit Increase For Additional Years Of Income

Of course, the caveat is that determining whether an upcoming years worth of earnings may be higher than historical inflation-adjusted earnings requires first determining what those historical earnings were on an inflation-adjusted basis. This can be estimated by first obtaining the individuals Social Security work history, which can be found by logging into the individuals My Social Security online account, or drawn directly from his/her Social Security statement. Once those historical earnings are found, they can be adjusted using the National Wage Index adjustment factors , to determine what the inflation-adjusted historical earnings amounts really were.

Obtaining the list of year-by-year historical earnings from the Social Security work history record is ultimately necessary for two reasons. First, its necessary to determine which of the three bend points the Social Security income replacement rates will apply, as theres a big difference in benefit between the 90%, 32%, and 15% levels! Second, having historical inflation-adjusted earnings makes it possible to compare the upcoming years earnings to the lowest historical inflation-adjusted year, to determine the income difference and prospective increase in AIME.

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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