Learn More About Social Security
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.
Review Your Earnings History
While you are still logged into your account, look for the link to your earnings history. Click on it to see a full list of your wage income, dating back to your earliest days of working. Your Social Security benefit is calculated from these numbers. If some of your income is missing or incorrect, your benefit estimate may also be wrong.
Review your earnings history alongside your tax returns, paying particular attention to the years you earned the most. The Social Security formula only considers your highest-paid 35 years of working, so any issues in your lower-wage years may not be relevant.
If you see any mistakes, gather up W-2 forms, pay stubs, or tax returns showing your correct wages. You’ll have to call the Social Security Administration, explain the problems you see, and present your documentation to get your earnings statement corrected.
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.
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Calculate Your Monthly Social Security Earnings
It is essential to know how to calculate benefits regarding the average indexed monthly earnings. You will need to provide all details in relation to your sources of income, such as employment, self-employment, wages, and salaries. To make the process easy, open an SSA online account. You will then be able to receive your income statement. You will verify the details.
The social security department will calculate benefits by first indexing your income for each year. Indexing refers to adjusting your income for each year for inflation. The indexing helps the SSA convert your income to the current dollar value. It also applies to the income you earned many years ago. You can calculate benefits to verify the adjustments to your income by using an online inflation calculator.
Factors That Affect How Much You’ll Get In Retirement
Most retirees rely on Social Security. One in four gets 90% of their retirement income from the program. About half rely on it for 50% of their income.
Although Social Security is only one part of a secure retirement plan, it’s helpful to get a rough idea of how much you can expect. If you’re eligible for Social Security, your monthly benefit is based on two factors:
- How much money you earned during your working career
- The age you choose to start getting payments
Let’s look at how each of these affects your future Social Security income.
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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.
What If I Continue Working In My 60s
Many people whose health allows them to continue working in their 60s and beyond find that staying in the workforce keeps them young and gives them a sense of purpose. If this sounds like something youâd like to do, know that working after claiming early benefits may affect the amount you receive from Social Security. Why? Because the Social Security Administration wants to spread out your earnings so you donât outlive them. If you claim Social Security benefits early and then continue working, youâll be subject to whatâs called the Retirement Earnings Test.
If youâre between age 62 and your full retirement age, and youâre claiming benefits, you need to know about the Earnings Test Exempt Amount, a threshold that changes yearly. For 2021, the Retirement Earnings Test Exempt Amount is $18,960/year . If youâre in this age group and claiming benefits, then every $2 you make above the Exempt Amount will reduce by $1 the Social Security benefits you’ll receive.
Contrary to popular belief, this money doesnât disappear. It gets credited back to you – with interest – in the form of higher future benefits. You may hear people grumbling about the Social Security âEarnings Taxâ, but itâs not really a tax. Itâs a deferment of your benefits designed to keep you from spending too much too soon. And after you hit your full retirement age, you can work to your heartâs content without any reduction in your benefits.
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When Do You Get Your Full Social Security Benefits
The Social Security benefits formula can be complicated. The benefits equal a percentage of the average of your inflation-adjusted wages in the 35 years your earnings were the highest.
Your benefits can be affected by your age when you get your first monthly check. Your standard benefit is available only when you reach your designated full retirement age . Before that FRA point, benefits are available to withdraw but your monthly check will be reduced accordingly. And delaying filing a claim until after that FRA point will result in an increased monthly check amount based on a specific calculation.
The good news is, you don’t have to learn the complicated math on the benefits formula or the impact of an early or a delayed claim. Instead, you can simply sign in to your personalized online Social Security account to see an estimate of what your earned benefits would be at different claiming ages.
Who Can Use The Retirement Estimator
You can use the Retirement Estimator if you have enough to qualify for benefits and you are not:
- Currently receiving benefits on your own Social Security record.
- Waiting for a decision about your application for benefits or Medicare.
- Age 62 or older and receiving benefits on another Social Security record.
- Eligible for a .
If you are currently receiving only Medicare benefits, you can still get an estimate. For more information, read our publication .
If you cannot use the Retirement Estimator or you want a survivors or disability benefit estimate, please use one of our other .
How To Get A Copy Of Your Social Security Statement
The SSA mails out Social Security Statements to follks age 25 and over before their birthdays during their 25, 30, 35, 40, 45, 50, 55, and 60 years. For those age 60 until retirement, the SSA will send out statements every year. You can also go online to get a copy of your statement or view it online. Go to www.ssa.gov/mystatement/ and open an account with Social Security to view your statement.
Why Your 59% Cola Might Not Go Far
The Social Security COLA is tied to inflation.
The annual increase is meant to offset the rising cost of everyday essentials like food, housing and gas.
Yet Social Security COLAs have historically lagged behind inflation including this year.
The Consumer Price Index, a government measure for the change in prices over time, hit 6.2% in October so the 5.9% COLA already falls short.
Higher Medicare costs in 2022 will likely erode the new Social Security adjustment even further.
Most Medicare beneficiaries have their monthly Part B premium automatically deducted from their Social Security checks.
On Nov. 12, the Centers for Medicare & Medicaid Services announced that Part B premiums are increasing by $21.60 a month in 2022 the biggest one-year increase in Medicare history.
Medicare beneficiaries are also facing higher Part A and Part B deductibles next year.
Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder.
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Get Ssa Benefits While Living Overseas
U.S. citizens can travel to or live in most, but not all, foreign countries and still receive their Social Security benefits. You can find out if you can receive benefits overseas by using the Social Security Administrations payment verification tool. Once you access the tool, pick the country you’re visiting or living in from the drop-down menu options.
Easily Estimate Your Social Security Income When You Retire
The collecting of social security benefits is a very important part of your retirement. In most cases, Americans have little idea as to how their benefits will be once they reach retirement age. Its important to know what factors are considered in determining your social security benefits.
The following factors will determine how your benefits will be calculated: earning history, work history, birth year, claiming age, total income, geographical location, and if you are still receiving an income. The Social Security administration has a number of tools that can help you get a ball park estimate of you monthly benefit amount.
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A You Can Continue Working And Start Receiving Your Retirement Benefits
If you start your benefits before your full retirement age, your benefits are reduced a fraction of a percent for each month before your full retirement age.
You can get Social Security retirement benefits and work at the same time before your full retirement age. However your benefits will be reduced if you earn more than the yearly earnings limits.
After you reach your full retirement age, we will recalculate your benefit amount to give you credit for any months you did not receive a benefit because of your earnings. We will send you a letter that explains any increase in your benefit amount.
If you delay filing for your benefits until after full retirement age, you will be eligible for delayed retirement credits that would increase your monthly benefit. If you also continue to work, you will be able to receive your full retirement benefits and any increase resulting from your additional earnings when we recalculate your benefits. Once you reach full retirement age, your earnings do not affect your benefit amount.
If you start receiving retirement benefits before age 65, you are automatically enrolled in Original Medicare when you turn 65. If you or your spouse are still working and covered under an employer-provided group health plan, talk to the personnel office before signing up for Medicare Part B. To learn more, read our Medicare publication.
Social Security Statement Information
SSA must provide you with your Social Security Statement if you request it as long as youre at least 25 years old, have a Social Security number, and earn wages/net self-employment income. The statement must provide a record of your earnings an estimate of your current/to-date contributions to the Social Security program and an estimate of your current disability insurance/survivor benefits and future retirement benefits .
Important information, such as the number of work credits youve accumulated to date , is used by both SSA and the Centers for Medicare & Medicaid to calculate your future or current benefits. Both programs are based on your earnings and the taxes you pay into these programs.
Many people enjoy the ability to check their Social Security Statement online. Its more convenient and secure because, after establishing your Social Security My Account, you can check the information for accuracy any time. Its a wise idea to check your SSA earnings record at least once a year or more.
Your Social Security Statement also estimates the amount of dependents/survivors/ benefits that are potentially claimable on your work record:
In addition to important information about how to estimate your future Social Security benefits, the Social Security Statement includes a reminder to check and request a correction of your earnings record if its not correctly reported.
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D You Can Stop Working And Not Begin Receiving Your Retirement Benefits
We calculate your benefits based on your highest 35 years of earnings. If you stop working before you have 35 years of earnings, or you have low earnings for some years, this will affect your benefit calculation. However, if you wait to start benefits after you reach full retirement age, your benefits will increase for each month you do not receive them until you reach age 70. There is no incentive to delay filing for your benefits after age 70.
If you are not receiving your Social Security benefits when you turn 65, you will need to apply for Original Medicare three months before you turn 65. If you dont sign up for Medicare Part B when youre first eligible at age 65, you may have to pay a late enrollment penalty for as long as you have Medicare coverage.
Social Security Retirement Calculator Input
Before you use the Social Security retirement calculator, plan to input:
- If you are married/were married
- Your date of birth and/or your spouses date of birth
- Whether you/your spouse worked for the U.S. government or state/local government for at least 10 years
- Your average salary per year and/or your spouses average salary per year
Your age, marital status, and wage/income history is used to estimate your Social Security retirement benefits and/or your spouses Social Security retirement benefits.
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Know The Impact Of Continuing To Work
When you claim Social Security at 62, know that you are subject to a cap on wage income. For every $2 you earn above the cap, your Social Security benefit is reduced by $1. The cap changes annually, but it’s $18,960 in 2021. If you expect to earn $1,000 monthly from Social Security, it only takes wage income of about $43,000 to wipe out your benefit entirely.
Once you reach your FRA, the earnings restriction falls away. You can work and earn as much as you want, without any reduction to your benefit.
There Are A Few Tools You Can Use To Calculate Your Social Security Benefits Including Signing Up For A My Social Security Account
The best way to estimate your Social Security benefits is to sign up for a my Social Security account. The Social Security Administration used to mail benefit statements every five years to workers between the ages of 25 and 60 and then annually until they started taking benefits. But since 2011, the agency has cut back on mailing statements. It now only sends paper statements to workers who are at least 60 years old and have not yet signed up for a my Social Security account. The statements are sent about three months before your birthday.
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For those who have an account, you will receive an email about three months before your birthday reminding you to review your online statement.
The benefit estimate provided in the statement is based on your past earnings and a projection of your future income, which assumes your income will remain at the same level as the previous year until you retire. You could get more than the estimate if you end up earning more in the future or less if your income drops. The statement provides an estimate if you continue working until age 62, your full retirement age and age 70.
The statement also includes an estimate for survivor benefits for your family and what you would receive each month if you became disabled and started taking disability benefits.
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When You Choose To Start Taking Social Security Benefits
The yearand even the month within that yearthat you choose to begin taking Social Security benefits affects how much you receive each month. You can start claiming Social Security benefits early as age 62, the current early retirement age. But you wont get your full PIA. Itll be reduced based on how many months you have until your full retirement age. This reduction can really add up, topping in at as high as 30% for particularly early claimers.
You can avoid these surcharges on your PIA, of course, simply by waiting to start payments until your full retirement age. This is generally between ages 66 and 67, depending on when you were born.
You can even add onto your base amount by delaying when you start benefits. After you reach full retirement age, you can boost your benefits by up to 8% of your PIA annually simply by not claiming Social Security. These benefit increases are known as delayed retirement credits, and you can accrue them up to age 70.
An important note: These benefit rate changes are performed to provide roughly the same cumulative benefit over a lifetime, assuming a roughly average lifespan. In other words, if you start Social Security earlier, youll probably claim it for longer someone with the same lifespan who delayed payments would claim them for less time. To provide them the same total benefit, earlier payments must be smaller and later benefits have to be larger to catch up.
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