Monday, May 16, 2022

How To Estimate Your Social Security Benefits

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How Is Your Benefit Calculated

How to Calculate Your Social Security Benefits

Social Security actually calculates your benefit based on the monthly average of your 35 highest earning years, not your last five years nor your highest three years, said Czarnowski. And if you dont have 35 earning years, zeros get plugged into the calculation, and that lowers your monthly average and, in effect, lowers your benefit.

List Each Year’s Earnings

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.

How To Decide When To Claim Social Security

Think less about when you should claim Social Security and more about what you can do. Once understand what can do, in a position to decide what you should do, said Czarnowski.

One thing thats critical to learn is your full retirement age or FRA. Thats the age at which you’re entitled to your full retirement benefit amount. And your year of birth determines your FRA.

You can find your FRA by birth year on the Social Security website. But you dont have to claim at FRA. In fact, you can start collecting benefits as early as age 62 or as late as age 70. If, however, you start receiving benefits early, your benefits are reduced permanently a small percent for each month before your FRA. And if you delay your benefits until after FRA, you will be eligible for delayed retirement credits that would increase your monthly benefit.

But no matter when you claim, make it an informed decision, Czarnowski said.

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Calculate Your Highest Benefits

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Bob Poole

How To See Your Estimated Future Social Security Benefits

Calculating Taxable Social Security Benefits

If you want to see an estimate of your future benefit, you can create an account at Signing up for an account is quick and free and requires providing some basic details, including your Social Security number, as well as answering identifying questions.

If you already have an account, you can simply visit the mySocialSecurity website and sign in with your user name and password. You’ll likely need to enter a security code though, which will be sent to the email address and/or smartphone number you have on file.

After signing in, you can see your future benefit amount by scrolling down to the section called “Plan for Retirement.” There’s a graph showing estimated benefits at different filing ages. And you can use a pull-down menu to select the exact age when you want to start your checks. The website will show you how much your monthly and annual Social Security income will be at each of those chosen ages.

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Using this tool helps you understand how an early or late claim raises or lowers the monthly income Social Security will offer you so you can make a more informed choice about when to file. It also gives you a more realistic perception of just how much income retirement benefits provide — which may be less than you think.

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More From Life Changes:

The annual adjustments are based on inflation. So bigger monthly checks mean that consumer prices have also gone up. Consequently, the extra cash may not go as far.

The average monthly retirement benefit will go up by $92 to $1,657 in 2022 from $1,565 in 2021.

But the size of the increase will vary by beneficiary.

“Anybody who is currently in receipt of a benefit should take a look at what their benefit is and imagine what a roughly 5.9% increase will do to that benefit level,” Stephen Goss, chief actuary at the Social Security Administration, said during a recent webinar hosted by the Bipartisan Policy Center.

However, there is one thing that will offset how large those checks will be: Medicare Part B premiums.

Those payments toward Medicare Part B are often deducted directly from beneficiaries’ monthly checks. However, not everyone has Medicare Part B coverage, particularly if they are still covered under an employer health plan or if they have not yet reached Medicare eligibility age, which is 65.

The standard Medicare Part B premium is projected to be $158.50 per month, up from $148.50 this year. However, the rates for next year have not been officially announced.

If you are not covered by Medicare Part B, you can multiply your monthly benefit amount by 1.059 to approximate your payment for next year, said Joe Elsasser, founder and president of Covisum, a Social Security claiming software company.

Why Do I Need To Know How To Calculate My Social Security Benefits

So you may be thinking, Why do I need to know how to calculate my own Social Security benefits? After all, the SSA will give me an estimate at any time.

Thats true! You can go to your My SSA account online and see an up-to-date copy of your benefits estimate. So why would you need to know how to do this calculation on your own?

Its important for a few reasons.

First, it never hurts to understand the mechanics behind an income stream thatll probably be a large part of your overall retirement income.

Secondly, your benefits estimate from the Social Security Administration is probably wrong. This is because their estimation methodology has two serious flaws: 1) They assume your future earnings wont increase2) They use todays social security formula

This means that these estimates are less accurate for younger workers but more reliable for workers who are close to retirement.

So, understanding how to do this calculation is especially important if you plan to retire early or later than normal or if you have a significant earnings change in the last few years of working.

To do this calculation, there are only four steps.

  • Adjust all earnings for inflation
  • Calculate your Average Indexed Monthly Earnings
  • Apply your AIME to the benefit formula to determine primary insurance amount
  • Adjust PIA for filing age
  • Also Check: How Much Will I Collect In Social Security

    What Will My Social Security Benefits Be When I Retire And What About Those Of My Spouse

    Your Social Security benefits can be estimated based on your average annual income, your current age and your age when you retire. Use our calculator to estimate your Social Security benefits during retirement.

    For a more accurate and detailed estimate, visit the Social Security Administration website at where benefits can be determined based upon your exact earnings history and the exact date of your retirement.

    Here’s How To Calculate If Delaying Social Security Benefits Makes Sense

    Fisher Investments Explains How to Estimate Your Social Security Benefit

    First, you need to understand a few key things:

    • How much money you’ll miss out on by waiting for benefits to begin
    • How much extra money you’ll get in each monthly check if you wait to start your benefits
    • How long you’ll need to receive extra money in your monthly checks to make up for all the potential income you missed out on

    Fortunately, it’s pretty easy to calculate these numbers and to do the math to figure out if delaying Social Security will probably pay off for you.

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    The Missing Social Security Annual Earnings And Benefits Statements

    You may be wondering why you even need to go to the Social Security Administration website to get a projection of your benefits. Why not just wait to receive your Annual Earnings and Benefits Statements that will give you the most up-to-date information?

    Those statements were popular, but unfortunately theyâre gone. The Social Security Administration eliminated them in as a result of budget cuts.

    In addition, while the statements did provide a fairly accurate estimate of future benefits based on earnings to date, they did not give you the capacity to project what your benefits will be based on higher future earnings. The Retirement Estimator will allow you to do exactly that.

    Have you gotten a recent estimate of your Social Security benefits? Leave a comment!

    Kevin Mercadante

    Report The Death Of A Social Security Or Medicare Beneficiary

    You must report the death of a family member receiving Social Security or Medicare benefits. The Social Security Administration processes death reports for both. Find out how you can report a death and how to cancel benefit payments. In addition to canceling SSA and Medicare benefits, find out what other benefits and accounts you should cancel.

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    Social Security Bend Points

    The Social Security benefits formula is designed to replace a higher proportion of income for low-income earners than for high-income earners. To do that, the formula uses what are called bend points.” These bend points are adjusted for inflation each year.

    Bend points from the year you turn 62 are used to calculate your Social Security retirement benefits. The example in the table below uses 2020 bend points. It works like this:

    • You take 90% of the first $906 of AIME.
    • You take 32% of the next $5,785 of AIME.
    • You take 15% of any amount over that $5,785.
    • You total those three numbers.

    The result is your primary insurance amount, or PIA, the amount you will receive if you begin benefits at your Full Retirement Age .

    Your PIA is rounded to the next lowest dime, and your benefit amount is rounded to the next lowest dollar.

    Technically, your PIA is calculated, rounded to the next lowest dime, and then any inflation adjustments are applied. That number is then rounded to the next lowest dime. Then any increase or decrease based on age is applied. That number is then rounded down to the next lowest dollar.

    You can see current and historical bend points and the current year’s bend points on the Bend Formula Bend Points page of the Social Security Administration’s website.

    In the example in the table below, you can see how the AIME calculated in the previous step was plugged into the bend point formula to calculate the PIA.

    Benefit Reduction If Taken Before Full Retirement Age

    How to Estimate Your Social Security Retirement Benefits ...

    When calculating benefits for early retirement, there are one or two calculations, depending on how early benefits are taken. Assuming a normal retirement age of 67, the age of 62 is the earliest year a person can receive benefits or 60 months early.

    The benefit is reduced by 5/9 of 1% for each month before the normal retirement age , up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of 1% per month.

    For example, let’s say that a person wants to retire at 62, leading to a 60-month reduction from the normal retirement age of 67. The first 36 months would be calculated as 36 months times 5/9 of 1% plus 24 months times 5/12 of 1%.

    • First 36 months: 5/9 = .5555 * 1% = .005555 * 36 months = .19999 or 20%*
    • Remaining 24 months: 5/12 = .416666 * 1% = .00416666 * 24 months = .0999 or 10%
    • In other words, benefits would be reduced by 30% if taken at age 62.

    *The results were rounded and multiplied by 100 to create a percentage.

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    Calculate What Your Monthly Benefit Would Be At A Younger Claiming Age

    Both your wages over your career and your age when you start checks determine what your monthly benefits are.

    • If you claim benefits at full retirement age , you get your primary insurance amount. It’s calculated based on a percent of average wages in the 35 years your inflation-adjusted income was highest.
    • If you claim before FRA, benefits are reduced by five-ninths of 1% for the first 36 months and five-twelfths of 1% for each prior month.
    • If you claim after FRA, benefits are increased by two-thirds of 1% for each month until age 70.

    You can see your standard benefit on the Social Security Administration website. The SSA website will also show you your benefits at different proposed claiming ages. Or you can do the math by applying the above penalties and credits to your standard benefit.

    For example, if your full retirement age is 67 and you retire five years early, you’d be hit with:

    • 36 months of penalties equaling five-ninths of 1%
    • An additional 24 months of penalties equaling five-twelfths of 1%.

    If your standard benefit would have been $1,600 and you end up with a 30% reduction due to your early claim, the checks you’ll get after starting them at 62 would equal $1,120 per month.

    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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    Simplifying Your Social Security Taxes

    During your working years, your employer probably withheld payroll taxes from your paycheck. If you make enough in retirement that you need to pay federal income tax, then you will also need to withhold taxes from your monthly income.

    To withhold taxes from your Social Security benefits, you will need to fill out Form W-4V . The form only has only seven lines. You will need to enter your personal information and then choose how much to withhold from your benefits. The only withholding options are 7%, 10%, 12% or 22% of your monthly benefit. After you fill out the form, mail it to your closest Social Security Administration office or drop it off in person.

    If you prefer to pay more exact withholding payments, you can choose to file estimated tax payments instead of having the SSA withhold taxes. Estimated payments are tax payments that you make each quarter on income that an employer is not required to withhold tax from. So if you ever earned income from self-employment, you may already be familiar with estimated payments.

    In general, its easier for retirees to have the SSA withhold taxes. Estimated taxes are a bit more complicated and will simply require you to do more work throughout the year. However, you should make the decision based on your personal situation. At any time you can also switch strategies by asking the the SSA to stop withholding taxes.

    How Long Can You Stay On Each Page

    How to Estimate your Social Security Benefits | Your Retirement Authority

    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.

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    What Is The Maximum Social Security Benefit In 2017

    cap2017maximummaximum2017maximum benefitRemember, if you receive benefits or have Medicare, you can use your my Social Security online account to:

  • Get your benefit verification letter
  • Check your benefit and payment information and your earnings record
  • Change your address and phone number
  • Start or change direct deposit of your benefit payment
  • How Does The Social Security Administration Calculate Benefits

    Benefits also depend on how much money youâve earned in life. The Social Security Administration takes your highest-earning 35 years of covered wages and averages them, indexing for inflation. They give you a big fat âzeroâ for each year you donât have earnings, so people who worked for fewer than 35 years may see lower benefits.

    The Social Security Administration also makes annual Cost of Living Adjustments, even as you collect benefits. That means the retirement income you collect from Social Security has built-in protection against inflation. For many people, Social Security is the only form of retirement income they have that is directly linked to inflation. Itâs a big perk that doesnât get a lot of attention.

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    How To Get A Social Security Card

  • Gather your documents. Learn what documents you’ll need to get a card. Select your situation:
  • Adult or child
  • Original, replacement, or corrected card
  • U.S. born citizen, foreign born U.S. citizen, or noncitizen
  • Apply online for a replacement card. Apply online if youre not changing anything on your card and you are eligible. This option is available in most states. You will need to make a my Social Security account first. Or complete an application. If you can not apply online, fill out an application and return it to the SSA. Find out where to take it in person or mail it.
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