Thursday, June 16, 2022

How To Find My Future Social Security Benefits

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What Social Security Would Look Like In 2035 With This Change

How My Social Security Benefit Changed After Quitting My Job (2019)

An increase in the payroll tax rate could take different forms. Currently, the total payroll tax is allocated equally between the employee and the employer. The projected tax increase of 3.14% could be allocated equally among employers and employees or allocated more to the employer to hide the tax hike from taxpayers.

A legislative proposal called the Social Security 2100 Act from Rep. John Larson favors an equal split. It would raise the Social Security tax rate to 7.4% for both the employer and the employee. The bill has gained some support but so far has stalled in Congress, Politico reported.

Actuarial Status And Budget Scoring

The requirements in the law for the annual report of the Social Security Board of Trustees are specific on the nature of the analysis that is desired. Although the OASDI program is highly dependent on the trust fund assets for solvency, and these assets are held in Treasury securities, the assessment of the actuarial status of the program is separate from direct consideration of implications for the federal government budget.

An additional important distinction in trust fund versus budget scoring is the assumption about current law. In the trustees report, careful distinction is made between the cost of the programreflecting scheduled benefits, and the actual expendituresreflecting the benefits that would be payable subject to the limits imposed by the inability of the trust funds to borrow. If the trust funds ever become exhausted, expenditures thereafter would be limited to the amount of continuing tax income. It is projected in the 2009 Trustees Report that only 76 percent of scheduled benefits would be payable and could be paid at the time the trust fund is exhausted in 2037. This limitation not only places an absolute braking force on the spending that is possible by the OASDI program, but also forces Congressional action before exhaustion of the funds.

Primary Insurance Amount Calculation

For 2022, the SSA established the first bend point as $1,024 and the second bend point as $6,172. Using the AIME from the earlier example of $10,141 and the bend points, we can calculate the primary insurance amount .

Below are the steps to calculating the PIA:

  • Multiply the first $1,024 of the person’s AIME by 90% = $921.60
  • Subtract the 1st and 2nd bend point and multiply that difference by 32% = $5,148*.32 = $1,647.35*
  • Subtract the 2nd bend point amount from the total AIME amount and multiply the difference by 15%. = $3,969*.15 = $595.35

*Please note that the calculation results are required to be rounded down to the next lower multiple of 10 cents.

  • The PIA is the sum of the three calculation results: = $3,164.30

*The multipliers90%, 32%, and 15%are set by law and do not change annually. The bend points are inflation-indexed but only through age 62. PIA is effectively locked in at age 62.

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When Will You Collect

The SSA calculates your benefit amount at your full retirement age . This depends on the year you were born. FRA by birth year is:

  • 19431954: age 66
  • 1955: age 66 and two months
  • 1956: age 66 and four months
  • 1957: age 66 and six months
  • 1958: age 66 and eight months
  • 1959: age 66 and 10 months
  • 1960 and later: age 67

The monthly amount you are eligible to receive at your FRA is considered your full benefit, but it is not your minimum or maximum benefit.

You have the option to file for early retirement as early as age 62. But, you may choose to delay taking your benefits until as late as age 70.

There are many reasons why you might choose to take early retirement or to delay it. That choice has a direct impact on the amount of your monthly payment. If you opt for early retirement, you are choosing a lower monthly payment for the rest of your life. By choosing to delay your benefit to any age between your FRA and age 70, you lock in an increase.

Retiring Early Will Reduce Your Benefit

How to look up your future Social Security benefits online ...

You can begin receiving Social Security benefits before your full retirement age, as early as age 62. However, if you retire early, your Social Security benefit will be less than if you wait until your full retirement age to begin receiving benefits. Your retirement benefit will be reduced by 5/9ths of 1 percent for every month between your retirement date and your full retirement age, up to 36 months, then by 5/12ths of 1 percent thereafter. For example, if your full retirement age is 67, you’ll receive about 30 percent less if you retire at age 62 than if you wait until age 67 to retire. This reduction is permanent–you won’t be eligible for a benefit increase once you reach full retirement age.

However, even though your monthly benefit will be less, you might receive the same or more total lifetime benefits as you would have had you waited until full retirement age to start collecting benefits. That’s because even though you’ll receive less per month, you might receive benefits over a longer period of time.

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An Annuity Investment Example

Suppose, for example, that you want to guarantee that you’ll receive $2,000 each month in retirement on top of your Social Security income. You decide that you want a conservative investment, so you choose to invest money into an annuity that will make payments each month to you for the rest of your life once you retire.

Assume that your annuity grows at a rate of 3.5% annually. You would need to deposit $456,858 today in exchange for the security of your $2,000 monthly payment for 30 years. By choosing higher-risk investments, you could earn a higher return on your money, but this deal may sound great to you if you value a low-risk investment and anticipate living a long life.

Addressing The Social Security Problem

In places like the United Kingdom, governments have begun to prefund their Social Security plans. In the United States, prefunding is being considered, and so are other solutions like infusions from general revenue and increases to payroll tax.

Social Security is seen as too important of a safety net for millions of American workers to risk losing. If small changes to the Social Security system are made now, they’ll go a long way toward ensuring that drastic measures don’t become necessary in the future.

Also Check: How Much Social Security Will I Get At Age 67

Invest In A Roth Account

Investing in a Roth 401 or Roth IRA instead of a traditional 401 or IRA can make a huge difference in your future Social Security benefits. That’s because it can help you to avoid taxes on retirement income, which a growing number of seniors are subject to each year.

Social Security benefits aren’t taxed by the federal government until your provisional income reaches $25,000 as a single tax filer or $32,000 as a married filer. After you’ve hit this threshold, up to 50% of benefits are taxed. And if your income exceeds $34,000 as a single filer or $44,000 as a married joint filer, up to 85% of benefits will be taxed. Provisional income is half your Social Security, some nontaxable income, and all taxable income.

Since Roth distributions aren’t taxed, investing in a Roth means you likely won’t end up losing any part of Social Security to the federal government if you’ve made these accounts the centerpiece of your retirement savings plan. You’ll have a lot more money to spend from Social Security as a result.

Is There A Maximum Benefit

How to Calculate Your Social Security Benefits

Yes, there is a limit to how much you can receive in Social Security benefits. The maximum Social Security benefit changes each year. For 2021, itâs $3,895/month for those who retire at age 70 . Multiply that by 12 to get $46,740 in maximum annual benefits. If that’s less than your anticipated annual expenses, youâll need to have additional income from your own savings to supplement it.

Recommended Reading: Social Security Administration (ssa)

No : Don’t Earn Too Much If You’re Working In Retirement

If you’re planning to start collecting benefits before your full retirement age and you want to work some then, too, be careful, because your benefits may be reduced. The Social Security Administration explains: “If you’re younger than full retirement age during all of 2018, we must deduct $1 from your benefits for each $2 you earn above $17,040.” The year you reach your full retirement age, the earning limit jumps to $45,360, and the penalty decreases to $1 withheld for every $3 earned above the limit. Any money withheld isn’t lost, though. It’s factored into the benefit checks you receive later, which end up increased.

No : Delay Starting To Collect Your Benefits

Another way to increase your Social Security benefits is to delay starting to collect them. You can start as early as age 62 and delay up to age 70. Each of us has a “full” retirement age , and for every year beyond that that you delay, your benefits will grow by about 8%. Delay from age 67 to 70 and you’ll get benefits 24% bigger. The table below shows the effect of starting to collect early or late. For example, if your full retirement age is 67 and you start collecting benefits at 64, your checks will be 80% of what they would have been had you started collecting at 67.

Social Security benefits table

Also Check: When Can You Claim Social Security

This Simple Mistake Could Lead To A Dangerous Savings Shortfall In Retirement

When it comes to Social Security, expectations rarely line up with reality. Younger workers often assume they won’t get any money from the program because it will have disappeared by the time they’re of claiming age. While this is a stressful thought, it’s not particularly dangerous.

Older adults, on the other hand, tend to be a little too optimistic when it comes to Social Security. The average working adult 50 and older expects they’ll get about $1,572 per month from Social Security, according to a recent Nationwide survey, but the reality for retirees 50 and older currently claiming Social Security is only $1,380 per month on average. A $192 difference may not seem like that big of a deal, but it can create a real problem over the course of a retirement. Here’s why.

No : Delay Your Divorce

What You Need to Know About Social Security

This won’t work for everyone, but if you have been married for less than a decade and are planning to divorce, and if you are able to delay that divorce, doing so may serve you well. Divorcees may be able to claim benefits based on their ex-spouse’s earnings even if that ex has remarried if they were married for at least 10 years. If your future ex-spouse has a significantly stronger earnings record than you do, you may be able to collect a much bigger monthly benefit check based on his or her earnings than the one based on your own record. There are a few more rules related to this, so look into them if this might apply to you.

Also Check: When Should You Apply For Social Security

Besides Social Security Approximately How Much Money Should You Save In Advance For Retirement

Evaluating how much money you will need to retire has multiple variables depending on each household lifestyle, Coffman said. What is the cost-of-living expense in each individual home? The biggest expense is health care cost and usually traveling within the first five years of retirement.

A generally accepted rule of thumb for retirement planning is that you must have at least 80% of the annual salary earned at work, said Justin Nabity, CFP and founder and CEO at Physicians Thrive. This is sometimes referred to as replacement income. Therefore, if you earn $100,000 a year at work, you need at least $80,000 a year to retire. This is the beginning. Multiply this number by your average life expectancy after retirement to arrive at the minimum total amount you need. Anything above that limit and you are usually in good terrain financially.

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The Social Security Cola Could Be Reduced

Retirees receiving Social Security benefits typically see their checks increase slightly most years to keep pace with inflation. These cost-of-living adjustments or COLAs are based on the consumer price index. After no cost-of-living adjustment in 2015, the last few years saw a 0.3% bump for 2016, a 2% increase in 2017, a 2.8% boost for 2018, another 2.8% increase for 2019 and a 1.6% increase for 2020.

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Subcommittee On Social Security: The Time For Procrastination Is Over

During the subcommittee hearing, Larson said that “the time for procrastination is over” and that Democrats hope to bring the Social Security 2100 Act to the House floor by the spring.

Although the bill currently has hundreds of co-sponsors and endorsements from advocacy groups, it’s struggling to gain bipartisan support. All 195 lawmakers who sponsored the bill are Democrats, and during the hearing, Republicans showed reluctance to support the Social Security 2100 Act amid concerns of how to cover the cost of increased benefits.

“While I cannot support this bill, I am happy to work with Chairman Larson to get some real permanent targeted reforms enacted into law,” Republican Rep. Tom Reed of New York said.

Even if Social Security 2100 is passed by the House this spring, it still faces hurdles in the Senate. So while Congress debates a bipartisan effort to bolster Social Security, the future finances of millions of seniors and disabled Americans are hanging in the balance.

While this legislation would offer long-term financial aid for Social Security recipients, some consumers may be looking for ways to meet their short-term financial needs. You can view personal loan offers on Credible for free without impacting your credit score, allowing you to find the lowest rate possible for your situation.

What To Expect From Your Future Social Security Benefits

You should regularly check the estimated Social Security benefit youâll eventually get

Knowing what to expect from Social Security benefits can help you plan for retirement.

Determining your Social Security benefits is an important aspect of retirement planning, especially if you plan to rely on them during your retirement years.

According to the Center on Budget and Policy Priorities, around 97% of senior citizen Americans receive or will receive Social Security benefits. For half the seniors, Social Security provides 50% of their income, and for one in four it’s 90%. In June 2020, the average monthly benefit for a retired worker was $1,514 a month which accounts for about 40% of their past earnings.

You can get an estimate of your benefits at the SSA website. The Retirement Estimator calculator accesses your Social Security earnings record when you provide your name, Social Security number, date, place of birth and mother’s maiden name. Keep in mind that even though the estimate is based on your actual earning record, it is still only an estimate. Your actual benefit amount will be determined when your benefits begin, and will probably vary slightly from your estimate due to updates in your earnings record, inflation, and assumptions the calculator makes about your future earnings and length of employment.

Wondering how the U.S. government determines Social Security benefits? Besides how much you earn during your lifetime, the calculation is based on your full retirement age, when you retire and whether you continue working while collecting benefits.

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If You’re About To Apply For Social Security Retirement Benefits

If retirement is right around the corner, you probably have nothing to worry about when it comes to your Social Security benefits. The problems described above are highly unlikely to affect current retirees or even those who plan to retire in the next ten years. The SSA has also stated that it has no plans to cut current benefits.

The Full Retirement Age Could Increase

Because tax hikes arent popular, Congress will more likely raise the full retirement age for Social Security benefits, Roseman said. That means younger generations will have to work longer before they can start collecting benefits.

Currently, the age at which you can collect full retirement benefits ranges from 65 if you were born in 1937 or earlier, to 67 if you were born in 1960 or later.

Recommended Reading: When Can Collect Social Security

The Easiest Way To Find Out How Much Social Security Will I Get

Even if you arent of retirement age, you can plan for retirement now. Workers age 18 and older can also go online, create a personal account, and review their Social Security Statement. Go to www.ssa.gov/myaccount to review your Statement to ensure your earnings record is correct. This is how your benefits are computed.

Estimate Your Benefits

Knowing what you will get every month in retirement benefits will help you plan for your retirement. The Retirement Calculator within my Social Security allows you to get personalized retirement benefits estimates based on your actual earnings. This makes it easy to see how changes in the date or age at which you begin receiving retirement benefits will affect your future income.

If you do not want to create a my Social Security account

Social Security Calculators page

How To Calculate Your Social Security Benefits: A Step

Free Social Security Calculator Tool: Estimate Your ...

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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