Monday, May 16, 2022

How To Figure Out Social Security Benefits

Don't Miss

What Is The Social Security Benefits Formula For 2019

How to Calculate Your Social Security Benefits

The Social Security benefits formula that applies to determine your primary insurance amount is the formula in effect when you turn 62. The percentage of AIME you receive never changes, but the bend points do. In 2019, the bend points are $926 and $5,583. So, if you turn 62 in 2019, the Social Security benefits formula that would apply to determine your benefits is:

  • 90% of the first $926 in AIME
  • 32% of the amount of AIME between $926 and $5,583
  • 15% of the amount equal to or greater than $5,583 in AIME

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.

Full Retirement Age Calculation

Once you have figured out your AIME, the calculation and formula to figure out your Social Security benefits is pretty easy. The baseline for figuring out your Social Security benefits is for people that retire at their full retirement age, which is anywhere from 66 to 67 years in age, depending on the year in which you were born. Generally speaking, the lower your AIME is, the higher percentage of your income you will recapture each year in your benefit.

Recommended Reading: Social Security Name Change Divorce

Delaying Social Security Benefits

You can start collecting benefits at age 62, but that doesnt mean you should. Heres why: Each year you can wait increases your annual benefit amount by 7% to 8%, up to age 70. That could make a difference of thousands of dollars for your retirement income.

Before you decide:

  • Consider your individual financial situation.
  • If married, coordinate your claiming strategy with your spouse. For example, to maximize the benefit for a surviving spouse, the higher earner should wait as long as possible before claiming benefits.

How A Social Security Break

How to Calculate Social Security Benefits: 13 Steps

Figuring out the right time to start taking Social Security benefits isnt always a straightforward process. A Social Security break-even calculator can help you get some perspective on the numbers so you know what you stand to gain or lose by taking benefits earlier versus later.

Social Security break-even calculators help you find the best age to start taking retirement benefits. They do this by comparing your cumulative Social Security retirement benefits paid at age 62, your full retirement age and at age 70 and estimating how long it would take the benefits paid at age 70 to break even with benefits paid starting at age 62.

Heres a simple calculation to give you an idea of how a Social Security break-even calculator works. Say that you have the option to begin receiving $1,200 a month in benefits at age 62. Youd receive $1,700 in benefits if you wait until full retirement age at 66. Or you could receive $2,200 a month in benefits by delaying them until age 70.

The break-even point represents when the cumulative benefits even out. So if you wait until age 70 to start taking benefits, it would take you until age 79 to break even with the benefit amount youd receive if you started taking them at age 62. If you were to start receiving benefits at age 66, it would take you until age 75 to break even with the benefits youd receive if you started them at 62.

You May Like: Can I Locate Someone By Their Social Security Number

How To Calculate Your Social Security Benefits: A Step

Its important for you to have a clear understanding of the process used to calculate your Social Security benefits. If you understand this calculation, you may be able to spot mistakes and fix them before its too late.

Like anything with Social Security, the rules can seem complex at first. But once you get under the surface, they are actually pretty easy to understand. To help you, I distilled the several pages of calculation rules down into four easy-to-understand steps.

What If I Change My Mind

If you receive Social Security benefits at a reduced rate, but then change your mind, you have the option of withdrawing your application and paying back to the government what you’ve already received . Then, you could restart benefits at a later date to take advantage of a higher payout. But you are limited to one withdrawal per lifetime.

For example, let’s say you elected to receive early benefits at age 62, but then decided to go back to work at age 63. You could withdraw your Social Security application within the first 12 months of receiving benefits, pay back the years worth of benefits you received, go back to work, and then wait until a later age to restart your benefit checks at a higher level.

For important details about repaying benefits please read the SSA publication If You Change Your Mind.

Recommended Reading: Silverdale Social Security Office

Will Your Expenses Decrease After You Retire

Retirement could be more expensive than you expect.

If you’re planning an active retirement or carry a mortgage or other debt, retirement may be more expensive than you expect. Some regular expenses like your out-of-pocket health care costs will likely increase as you get older. You can protect your retirement lifestyle by reducing your largest expenses. You can also increase your regular income by claiming at your full Social Security benefit age or later. If you claim earlier, your monthly benefit could be reduced by as much as 30 percent.Create a retirement budget.

Retirement could be more expensive than you expect.

If you’re planning an active retirement or carry a mortgage or other debt, retirement may be more expensive than you expect. Some regular expenses like your out-of-pocket health care costs will likely increase as you get older. You can protect your retirement lifestyle by reducing your largest expenses. You can also increase your regular income by claiming at your full Social Security benefit age or later. If you claim earlier, your monthly benefit could be reduced by as much as 30 percent.Create a retirement budget.

Maintain your lifestyle by planning ahead.

Maintain your lifestyle by planning ahead.

Many people find retirement is more expensive than expected.

Many people find retirement is more expensive than expected.

Learn More About Social Security

Video: How To Calculate Social Security Benefits

The rules around Social Security can vary from very simple to fairly complicated. Our special coverage in Fidelity Viewpoints® includes topics such as working while retired, taxes, and more.

In our special video series, a Fidelity professional answers some of the most commonly asked customer questions about Social Security.

Also Check: Figure Out Social Security

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.

Costs Of The Solution

Two issues that are likely to arise in any discussion of fixing this problem are its cost to the Social Security trust fund and its cost to the federal budget. With regard to the cost to the Social Security trust fund, there are three ways to look at the issue.

One way is to view the cost relative to costs in a world in which no pandemic had occurred. For example, the cost could be measured using the economic assumptions in the most recent Social Security trustees report , which were formulated before the pandemic began. From this perspective, the cost would be zero because the legislative change would restore the world of Social Security benefits to what it would have looked like had there been no pandemic.

A second way of looking at the issue is to view the cost of the change relative to costs in a world that reflected economic assumptions indicative of the economic recession caused by the pandemic. From this viewpoint, there would be a cost associated with fixing the problem. For example, the chief actuary of the SSA estimates that if the AWI in 2020 were to fall 5.9 percent below its 2019 level, the AWI adjustments proposed by Chairman Larson would cost $90 billion in present-value dollars for the 75-year period from 2020 through 2094about 0.02 percent of taxable payroll over that period. . The cost over the 10-year period from 2020 to 2029 would be about $21 billion in nominal dollars.

Also Check: Social Security Reset Code

How Can You Maximize Your Own Benefits

For most older Americans thinking about claiming Social Security benefits, it’s too late to change your earnings record or to go back and earn more every year. But you can control both of the other two factors on this list you can make sure you’ve worked for at least 35 years prior to claiming benefits, and you can wait until 70 to claim them. Both of these steps can mean getting larger benefits, which can provide you with more financial security in your later years.

The Motley Fool has a disclosure policy.

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

Offer from the Motley Fool:The $16,728 Social Security bonus most retirees completely overlook

If you’re like most Americans, you’re a few years behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,728 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.

Using Your Benefit Estimates

How to Calculate Social Security Benefits: 13 Steps

As your statement will show, your Social Security retirement benefits will vary depending on when you claim them before or after your full retirement age . The longer you wait to start receiving payments, the higher your benefit amount will be.

However, it’s not always better to wait until your full retirement age to claim your Social Security benefits. If you need your Social Security benefits for living expenses, or you have a health condition that makes it unlikely that you will live past age 75 or so, you may be better off collecting your benefits sooner rather than later. You can use a calculator at the Social Security website to see which retirement age makes the most financial sense for you .

For comprehensive practical information about how and when to claim Social Security benefits, see Social Security, Medicare & Government Pensions, by Joseph Matthews with Dorothy Matthews Berman .

  • Trade
  • Also Check: Locate Someone By Social Security Number

    Earn The Maximum Taxable Earnings

    Remember above where I said Social Security benefits are based on average wages? This doesn’t necessarily refer to all wages you earned. Only wages up to the annual “wage base limit” are subject to Social Security tax and only wages up to that threshold count toward determining your benefits.

    For 2021, for example, the annual wage base limit is $142,000, but the limit changes from year to year. The limit creates a de facto cap on the amount of benefits you can receive. If your annual earnings meet or exceed the taxable maximum every year for 35 years, you’ll get the largest possible Social Security benefit that coveted $3,895 monthly check in 2021.

    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

    Don’t Miss: How Do You Make An Appointment For Social Security

    What Is A Social Security Card

    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.

    How Do Benefits Work And How Can I Qualify

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

    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

    Also Check: 820 Concourse Village West Social Security

    How To Qualify For The Highest Possible Social Security Benefit

    Editors Note: This story originally appeared on NewRetirement.

    Maximizing your retirement paycheck and getting the most out of Social Security is a goal for many retirees.

    For 2021, the highest possible Social Security benefit is $3,895 a month.

    Following you will learn what you would have needed to do to qualify for this amount.

    How Much Your Social Security Check May Increase In 2022 Explained

    • 12:10 ET, Aug 23 2021

    TENS of millions of Americans could be set for a monthly boost to their social security checks worth nearly $100 in 2022.

    That comes because of an anticipated 6.2% cost-of-living adjustment for those receiving social security benefits, the latest estimates from The Senior Citizens League show.

    Once you turn 62, you can start receiving social security benefits. However, youll receive less money if you claim before your full retirement age.

    Don’t Miss: How To Get Social Security Number Of Deceased Parent

    Whats Full Retirement Age

    Full retirement age is when youre eligible to receive full Social Security benefits. Your full retirement age depends on your birth year: Under current law, if you were born in 1951 or later, your full retirement age is now some point after age 65all the way up to age 67 for those born after 1959. If you were born before 1951, youve already reached age 66 and full retirement age.

    Retirement ages for full Social Security benefits

    If you were born in

    Your full retirement age is

    1950 or earlier

    Now You Know How The Social Security Benefit Formula Works

    10 free or cheap Social Security calculators to help you ...

    Now you know exactly how the Social Security benefit formula works. To sum it all up:

    So, while the Social Security benefits formula may seem simple since you’re just adding up different percentages of your average earnings over 35 years depending how much you earn, there’s obviously a lot more to applying the formula than first meets the eye.

    Recommended Reading: Can I Locate Someone By Their Social Security Number

    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%.

    More articles

    Popular Articles