Monday, May 16, 2022

How To Figure Your Social Security

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Check The Social Security Administration’s Math

How to Calculate Your Social Security Benefits

Your statement includes a record of the earnings on which you’ve paid taxes and an estimate of the benefits you will receive at various retirement ages: 62, 67, and 70. It is always wise for you to check the SSA’s numbers. Don’t be surprised if you uncover an error. Some government-watchers estimate that the SSA makes mistakes on at least 3% of the total official earnings records it keeps.

When you check your record, make sure that the Social Security number noted on your earnings statement is your own, and make sure the earned income amounts listed on the agency’s records mesh with your own records of earnings as listed on your income tax forms or pay stubs.

Can Your Pia Change After You Reach Age 62

There are two things that affect your PIA after you reach age 62:

  • Higher earnings: Earnings in years between age 62 and 70 that are higher than one of the 35 highest earnings years previously used in the formula will change your AIME which is used in the PIA formula.
  • Inflation: Your PIA will be adjusted by the same cost-of-living adjustments applied to people who are already receiving Social Security benefits. You can see;historical cost-of-living adjustment rates;on the Social Security Administration’s website.
  • 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.

    Apply For A Social Security Number For Immigrants

    Apply for an SSN with your immigrant visa

    Your may request a Social Security card as part of your visa application. When filing Form DS-230 or Form DS-260 , there is option to request a Social Security number. If you have selected this option, you do not need to submit a special application or go to a Social Security office to get a card.

    The Social Security Administration will assign you an SSN and issue you a card after you arrive in the United States. They will mail the card to the same U.S. mailing address where the Department of Homeland Security will send your green card. You should receive your Social Security card within 3 to 4 weeks after you arrive in the United States. If you do not receive the card by mail, contact the Social Security at 1-800-772-1213.

    Apply for an SSN when filing Form I-765

    Your may be able to apply for a Social Security Number at the same time you apply for employment authorization. If you need to file Form I-765 with the U.S. Citizenship and Immigration Services , you can request an SSN at the same time. Many adjustment of status applicants or DACA recipients use this method to request a Social Security Number.

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    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.

    How To Calculate Your Social Security Benefits: A Step

    Calculator for Social Security by Tamber Schorey

    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.

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    Do You Expect To Live A Long Life

    Many people live longer than they expect.

    Because Social Security provides guaranteed income for life, it’s especially valuable to you when you reach age 80 and beyond. Claiming benefits at your full Social Security benefit age or later could be a good way to secure your monthly income during your later years. Your benefit increases the longer you wait to claim, up to age 70, and is adjusted annually with the cost of living. If you live into your 80s but claim at age 62 instead of your full retirement age or later, your total lifetime benefits will be lower by thousands of dollars.Calculate your expected longevity.

    Claiming at your full benefit age could still make sense for you.

    We understand it’s difficult to make predictions. You may want to plan for the possibility that you may spend 20 or more years in retirement. On average, a woman reaching age 65 today will live to age 87, and a man will live to age 84. Waiting to claim as long as you can could still make sense for you if you are married, are the higher earner in the household, and want your surviving spouse to keep the highest monthly benefit after you die. Remember, you can claim at any point between age 62 and 70. Each additional month that you wait to claim gives you a permanent increase in your monthly benefit which becomes more valuable as you age.Calculate your longevity.

    There’s a good chance that you’ll live into your 80s and beyond.

    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.

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    How Is Social Security Taxed

    A retiree’s provisional income is used to determine the tax owed on their Social Security benefit.;

    Provisional income is equal to adjusted gross income plus non-taxable interest plus half of annual Social Security benefits.;

    That total is then applied to the following income limits to determine how much of the Social Security benefit will be taxed at the filer’s marginal tax rate:

    Provisional income for a single, head of household, or qualifying widow filerProvisional income for a married, joint filerAmount of Social Security benefit taxed
    Under $25,000
    85% of Social Security benefit taxed at filer’s marginal tax rate

    Who Is Eligible To Collect Social Security Retirement Benefits

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

    Workers who are at least age 62 and who have worked at least 10 combined years at jobs for which they paid Social Security taxes are eligible for Social Security retirement benefits. In many cases, spouses, widows and divorcees are eligible for Social Security retirement benefits based on a spouses or ex-spouses earnings history. Unmarried children 18 and younger can also get survivors benefits. You must be a U.S. citizen or lawful alien to collect benefits.

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    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:

    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.

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    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.

    Are Social Security Numbers Considered Public Records

    Free Social Security Calculator Tool: Estimate Your ...

    As we stated, Social Security Numbers ARE NOT public records and should be kept secure and private. It is classified as personally identifiable information, such as drivers license numbers and passport ID numbers.

    Conversely, public records are those considered to be publicly available and are generally provided at county courthouses, such as real property records, most criminal records, and bankruptcies, tax liens and judgments, respectively.

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    What A Social Security Break

    In a nutshell, a Social Security break-even calculator can tell you when the best age is to start taking Social security benefits, in terms of how much money you could expect to receive over time.;Going back to the previous example, lets assume that you track your benefit amounts over a 10-year, 20-year and 30-year period. Heres how your total benefits received would look over each of those periods, for all three starting points.

    Your cumulative benefits after 10 years:

    • $144,000, starting at age 62
    • $122,400, starting at age 66
    • $52,800, starting at age 70

    Your cumulative benefits after 20 years:

    • $288,000, starting at age 62
    • $326,400, starting at age 66
    • $316,800, starting at age 70

    Your cumulative benefits after 30 years:

    • $432,000, starting at age 62
    • $530,400, starting at age 66
    • $580,800, starting at age 70

    You can see that youd draw the most Social Security benefits in total if you wait until age 70 to start taking them, assuming you live to age 100. But that could be a big if when youre not in the best health.

    What you have to keep in mind when using a Social Security break-even calculator is that the numbers are hypothetical. They dont take into things that could affect your ability to draw benefits or how far those benefits might go, such as:

    How Much Of Your Social Security Income Is Taxable

    Review the list below to determine where your total income falls and how much of your Social Security income is taxable. For:

    • Single, Head of Household or Qualifying Widow,;the base amount is $25,000 and the maximum is $34,000.
    • , the base amount is $32,000 and the maximum is $44,000.
    • , the base amount is $0 and the maximum is $0.

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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.;

    Average The Highest 35 Years

    How to Calculate Social Security Tax

    The Social Security benefits calculation uses your highest 35 years of earnings to calculate your average monthly earnings. If you do not have 35 years of earnings, a zero will be used in the calculation, which will lower the average. In the table below, the highest 35 years are listed in Column G.

    Total the highest 35 years of indexed earnings, and divide this total by 420, which is the number of months in a 35-year work history, to find the Average Indexed Monthly Earnings.

    For our example worker, who was born in 1953 and turned 60 in 2013, the highest 35 years of wages total $1,919,040. Divide by 420 to get an AIME of $4,569.

    How to Calculate Your AIME for Social Security Benefits
    A
    ;

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    Earn Ssa Work Credits In Some Countries

    You may not have enough credits from your work in the United States to qualify for retirement benefits. But, you may be able to count your work credits from another country. The SSA has agreements with 24 countries. If you earned credits in one of those countries, they can help you qualify for U.S. benefits.

    How Does Social Security Calculate My Benefits

    Q. If you stopped working at 60 but you dont collect Social Security until 70, will there be an increase in payout between collecting at 66 or waiting until 70 even though you have not contributed to the system for 10 years?

    Hoping for more

    A. Its important to know how your Social Security benefit is calculated.

    Social Security first calculates your Average Indexed Monthly Earnings , said Jeanne Kane, a certified financial planner with JFL Total Wealth Management in Boonton.

    This is essentially your average income that you earned throughout your lifetime after its been adjusted for inflation, she said.

    Social Security only uses the highest 35 years of earnings in this calculation. These dont have to be a consecutive 35 or last 35, just the highest 35 years, she said.

    If you worked less than 35 years because you retired early or took time off to raise your children, your earnings will be $0 for those years, she said.

    Next, Social Security applies a formula to your AIME to calculate your Primary Insurance Amount , she said.

    PIA is the value of your benefit that you would receive at your full retirement age , she said. Your FRA depends on when you were born. If you were born before 1954 or earlier, your FRA is 66. The age then increases by two months for every year until you get to 1960 and later when the FRA is 67.

    Email your questions to .

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    How Inflation Impacts Your Pia

    Your PIA is calculated at age 62. If you wait beyond age 62, cost-of-living adjustments will be applied to your PIA for each year afterward.

    If you have already had most of your 35 years of earnings, and you are near age 62 today, the age 70 benefit amount you see on your Social Security statement will likely be higher due to these cos- of-living adjustments. Many people do not account for this when doing their own calculations, which can lead them to think that taking Social Security early is a better deal, when waiting is often the better deal.

    In the table below, our hypothetical worker, born in 1954, is eligible for full retirement at age 66. The column on the right shows the effect of inflation for waiting beyond age 62 to take their benefits.

    Effect of Age on Claiming Benefits
    Year

    Do You Expect To Have Additional Sources Of Retirement Income Beyond Social Security

    Calculating Taxable Social Security Benefits

    Continue saving in the coming years.

    Social Security won’t replace all of your pre-retirement income. On average, Social Security replaces 40 percent of a worker’s income. That means your retirement savings, pension, 401, or Individual Retirement Account will need to fill the gap. Claiming at your full Social Security benefit age or later can minimize this gap and maximize your monthly benefit. If you claim before your full retirement age, your monthly benefit could be reduced by as much as 30 percent.Learn more about saving for retirement.

    You have an opportunity to continue growing your money.

    If you can, get the highest monthly Social Security benefit possible by claiming at your full Social Security benefit age or later. If you claim before your full retirement age, your monthly benefit could be permanently reduced by as much as 30 percent. Also, take advantage of catch-up contributions to your 401 or Individual Retirement Account . Lastly, avoid losing your retirement savings to unnecessary tax penalties. If you withdraw your 401 or IRA savings before age 59½, you will likely face an early withdrawal penalty.Learn more about how retirement savings grow.

    It’s a perfect time to start saving.

    It’s never too late to start saving!

    There are many ways to plan for a secure retirement outside of Social Security.

    It’s never too late to start saving!

    A type of retirement savings account offered by employers to help their employees save for retirement.

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