How To Receive Federal Benefits
To begin receiving your federal benefits, like Social Security or veterans benefits, you must sign up for electronic payments with direct deposit.
If You Have a Bank or Credit Union Account:
- Call the Go Direct Helpline at .
If You Don’t have a Bank or Credit Union Account:
- Direct Express debit card – a pre-paid debit card. Get help by calling the Go Direct Helpline at .
Make Changes to an Existing Direct Deposit Account:
Learn how to make changes to an existing direct deposit account. You also may contact the federal agency that pays your benefit for help with your enrollment.
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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Theres An Annual Social Security Cost
One of the best features of Social Security benefits is that the government adjusts the benefits each year based on inflation. This is called a cost-of-living adjustment, or COLA, and helps your payments keep up with increasing living expenses. The Social Security COLA is quite valuable its the equivalent of buying inflation protection on a private annuity, which can get expensive.
Because the COLA is calculated based on changes in a federal consumer price index, the size of the COLA depends largely on broad inflation levels determined by the government. In 2021, Social Security beneficiaries saw a 1.3% COLA in their monthly Social Security benefits.
The Kiplinger Letter predicted in September that the COLA for 2022 could be 6%, which would be the largest adjustment since 1982. The final COLA for 2022 will be announced on Oct. 13.
Heres what COLAs have been in other recent years:
- 2009: 5.8%
- 2021: 1.3%
How Do You Qualify For Social Security Retirement Benefits
When you work and pay Social Security taxes, you earn credits toward benefits. Anyone born in 1929 or later, needs 40 credits . If you stop working before you have enough credits to qualify for benefits, the credits will remain on your Social Security record. If you return to work later, you can add more credits to qualify. The SSA wont pay any retirement benefits until you have the required number of credits .
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Social Security: What Are Delayed Retirement Credits And How Can You Use Them
Delayed retirement credits are a perk the Social Security Administration offers you for waiting to draw on your benefits. Your monthly benefit is increased by a certain percentage for each month you delay starting your benefits beyond full retirement age. Once you reach that age which is typically 67 you can request a benefits check.
The benefit increase stops when you reach age 70, which is the maximum distribution age. This means delayed retirement credits apply to any benefit you decide to take past your full retirement age, so a relatively short period of time, but worth the increase. The most a lump sum check will ever be is six months of benefits, which could be up to $9,000.
Delayed retirement credits are worth 8% a year, or two-thirds of 1% a month, and you can accrue them up until age 70. The table below shows how you can accrue these specific percentages based on your age.
|Year of Birth*|
|8.0%||2/3 of 1%|
Because of changes in FRA, the opportunity to collect delayed retirement credits will shrink beginning next year.
The Social Security Administration states that if youve already reached full retirement age, you can choose to start receiving benefits before the month you apply. However, you cannot receive retroactive benefits for any month before you reach full retirement age or more than six months in the past.
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You can access this information in early December prior to the mailed notice, the SSA wrote in a blog post.
Also, to make things easier, you can push notifications meaning youll get a text on your phone or an email when you have a new message waiting in your inbox.
However, if you dont have an account yet the deadline, unfortunately, passed to receive the COLA notice online.
That means youll have to wait patiently until your notice arrives at your door.
You can also calculate it yourself to get a rough estimate. For instance, a 5.9% increase of $2,000 is $2,118.
The new checks will go into effect in January 2022.
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How Much Is Taken Out Exactly
There is no standard amount that is taken out of your Social Security check when you sign up for Medicare. Instead, the amount deducted depends on several factors. Each part of Medicare has a different cost. On top of this, Part C and Part D are offered by private plans, which means their monthly premiums vary even more.
Although there are standard monthly premiums for Part A and Part B, the amount changes slightly each year. There are also additional costs that you may have to pay depending on your income level. We discuss these in more detail below.
To find out how much will be taken from your check, you need to refer to some specific parts of Medicare.
The Social Security Benefits Formula Is Progressive
Social Security, in general, is meant to replace about 40% of pre-retirement income. As you can see, the formula works to do that for most workers. Remember our example of a person with an AIME of $6,190.48. His primary insurance amount came to around $2,414 which is about 39% of his average inflation-adjusted wage.
However, the Social Security benefit formula is progressive. A progressive system redistributes income from people with higher lifetime average earnings to people with lower lifetime average earnings. It’s easy to see that the benefits formula is progressive, because you get benefits equal to 90% of your AIME if you earned only a small amount of money — but those who earned larger amounts get an ever-decreasing percentage of AIME factored into their benefits.
The result of this formula is that the ratio of lifetime benefits received by someone with lower earnings is higher, relative to payroll taxes paid, than the ratio of benefits-to-taxes-paid for a higher-earner. While higher earners do tend to live longer and collect benefits for more years, this only partly offsets the progressiveness of the benefits formula.
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Who Is Eligible For Social Security Benefits
Anyone who pays into Social Security for at least 40 calendar quarters is eligible for retirement benefits based on their earnings record. You are eligible for your full benefits once you reach full retirement age, which is either 66 and 67, depending on when you were born. But if you claim later than that – you can put it off as late as age 70 – youâll get a credit for doing so, with larger monthly benefits. Conversely, you can claim as early as age 62, but taking benefits before your full retirement age will result in the Social Security Administration docking your monthly benefits.
The bottom line: Youâre eligible for Social Security Benefits if youâve paid into the system for at least a decade, but your actual benefits will depend on what age â between 62 and 70 â you begin to claim them.
What Else Affects Your Retirement Benefits
Everyones retirement is unique. Beyond deciding when to begin receiving retirement benefits, other factors that can affect your benefits include whether you continue to work, what type of job you had, and if you have a pension from certain jobs.
Continuing To Work
You can choose to keep working beyond your full retirement age. If you do, you can increase your future Social Security benefits. Each extra year you work adds another year of earnings to your earnings record. Higher lifetime earnings can mean higher benefits when you choose to receive benefits.
Specific Types Of Earnings
While Social Security earnings are calculated the same way for most American workers, there are some types of earnings that have additional rules:
- Farm Work
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How Does The Calculator Estimate My Retirement Benefits Payment
Our simplified estimate is based on two main data points: your age and average earnings. Your retirement benefit is based on how much youve earned over your lifetime at jobs for which you paid Social Security taxes. Your monthly retirement benefit is based on your highest 35 years of salary history. You can get your earnings history from the Social Security Administration .
Your Social Security benefit also depends on how old you are when you take it. You can start collecting at age 62, the minimum retirement age, but youll get a bigger monthly payment if you wait until full retirement age, which is 66 but is gradually moving to 67 for people born in 1960 or after. If you can wait until 70 to start collecting, youll receive your maximum monthly benefit.
A single person born in 1960 who has averaged a $50,000 salary, for example, would get $1,332 a month by retiring at 62 the earliest to start collecting. The same person would get $1,911 by waiting until age 67, full retirement age. And he or she would get $2,370, the maximum benefit on those earnings, by waiting until age 70. Payments dont increase if you wait to collect past 70.
Other factors affecting the size of your benefit include whether youve worked for state or local government for more than 10 years your Social Security payment may be decreased if you paid into the civil service retirement program, for example.
How Do Benefits Work And How Can I Qualify
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
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You Can Claim Social Security Benefits Earned By Your Ex
Just because you’re divorced doesn’t mean you’ve lost the ability to get a Social Security benefit based on your former spouse’s earnings. You can receive a benefit based on his or her record instead of a benefit based on your own work record if you were married at least 10 years, you are 62 or older, and you are single.
Like a regular spousal benefit, you can get up to 50% of an ex-spouse’s benefit — less if you claim before full retirement age. And the beauty of it is that your ex never needs to know because you apply for the benefit directly through the Social Security Administration. Taking a benefit on your ex-spouse’s record has no effect on his or her benefit or the benefit of your ex’s new spouse. And unlike a regular spousal benefit, if your ex qualifies for benefits but has yet to apply, you can still start collecting Social Security based on the ex’s record, though you must have been divorced for at least two years.
Note: Ex-spouses can also take a survivor benefit if their ex died after the divorce, and, like any survivor benefit, it will be worth up to 100% of what the ex-spouse received. If you remarry after age 60, you are still eligible for the survivor benefit.
A claiming strategy if youre divorced: Exes at full retirement age who were born on January 1, 1954, or earlier can apply to restrict their application to a spousal benefit while letting their own benefit grow.
How To Correct An Error On Your Social Security Statement
If you have evidence of your covered earnings in the year or years for which you think Social Security has made an error, call Social Security’s helpline at 800-772-1213, Monday through Friday, from 7 a.m. to 7 p.m. This is the line that takes all kinds of Social Security questions, and it is often swamped, so be patient. It is best to call early in the morning or late in the afternoon, late in the week, or late in the month. Have all your documents handy when you speak with a representative.
If you would rather speak with someone in person, call your local Social Security office and make an appointment to see someone there, or drop into the office during regular business hours. If you drop in, be prepared to wait, perhaps as long as an hour or two, before you get to see a representative. Bring with you two copies of your benefits statement and the evidence that supports your claim of higher income. That way, you can leave one copy with the Social Security worker. Write down the name of the person with whom you speak so that you can reach the same person when you follow up.
The process to correct errors is slow. It may take several months to have the changes made in your record. After Social Security confirms that it has corrected your record, request another benefits statement to make sure the correct information made it to your file.
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Adjust Your Wages For Inflation
The Social Security Administration uses the Average Wage Index to adjust wages for inflation. The average wage index is a measure of U.S. wages. The AWI that applies to adjust your wages for inflation is the AWI in effect two years before you become eligible for Social Security. You become eligible for Social Security at 62, so you’re subject to the AWI in effect in the year you turn 60.
The table below shows the AWI for the past several years — and you can find a complete list of AWIs dating back to 1951 on the Social Security Administration website.
Table source: Social Security Administration.
If you turned 62 in 2019, you’d use the 2017 AWI — $50,321.89 — to determine how to adjust each year’s wages for inflation. The formula to adjust your wages requires you to:
- Divide the AWI in effect the year you turn 62 by the AWI in effect in the year you’re adjusting the wages for. This will give you the indexing factor.
- Multiply the relevant year’s wage by the indexing factor to determine your inflation-adjusted wage.
Here’s how this formula works in practice:
Do this math for each year you have earnings to figure out that year’s index-adjusted wage.
The Social Security Administration also lists indexing factors on its website for the current eligibility year. You can look up the indexing factors that apply and multiply each year’s indexing factor by the relevant year’s wages. This will give you your index-adjusted wage for every year you worked.
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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