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.
How Your Social Security Benefits Are Earned
To be eligible for Social Security benefits in retirement, you must earn at least 40 “credits” throughout your career. You can earn as many as four credits each year, so it takes 10 years of work to qualify for Social Security.
In 2021, you must earn $1,470 to get one Social Security work credit and $5,880 to get the maximum four credits for the year.
Social Security Payment Schedule: Here’s When You’ll Get Your Money In June
If you’re a new recipient of Social Security payments, we’ll explain how the payout dates work.
Katie is a Writer at CNET, covering all things how-to. When she’s not writing, she enjoys playing in golf scrambles, practicing yoga and spending time on the lake.
If you’re waiting on your first Social Security payment, you’re probably wondering when your check will arrive. Not all recipients of Social Security receive their money on the same day — there are actually several days throughout each month that payments are disbursed. We’ll explain below.
Also, did you know that Social Security benefits could get the largest increase we’ve seen in 40 years, starting in January 2023? You should receive a letter in December that’ll let you know your benefit rate for the next year.
We’ll tell you when you’ll get your next Social Security check and how your payment date is determined. For more, here’s how to replace your Social Security card and how to know when it’s safe to share your Social Security number.
Also Check: Social Security
What Is Full Retirement Age
The size of your monthly Social Security benefit depends on a few factors, including how much you earned over the years, the year you were born, and the age when you start claimingdown to the month.
Youll receive your full monthly benefit if you start claiming when you reach what Social Security considers your full retirement age , sometimes also referred to as normal retirement age. FRA was 65 when Social Security began, but it has been raised to 67 for anyone born in 1960 or later. To find your FRA, see the chart below.
|Finding Your Full Retirement Age|
What Information And Documents Do You Need To Apply
To apply for Social Security, youll have to provide the SSA with basic identifying information, such as your birthdate, Social Security number, number of dependents and citizenship status. Youll also need to provide work information, including your employers name and address and how much money you earned over the past two years. Documents you may need to provide include:
- your original birth certificate or other proof of birth
- proof of U.S. citizenship or lawful alien status if you were not born in the United States
- a copy of your U.S. military service paper and
- a copy of your W-2 form and/or self-employment tax return for last year
The Social Security Administration will contact you if you need to provide any additional information.
Also Check: Mysocialsecuirty
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.
Do Social Security Benefits Begin The Month Of Your Birthday
Receiving Social Security for the first time can be a freeing experience for some seniors as it often signals the official start of retirement. A number of seniors also rely on Social Security payments for basic household bills, making it all the more important to understand when payments begin. In general, American seniors become eligible for Social Security benefits at the age of 65 however, some seniors can receive payments earlier, but taking this route can reduce the amount of benefits received over the course of ones lifetime.
Do Social Security Benefits Begin the Month of Your Birthday?
Although many people believe that Social Security payments begin once someone becomes eligible, theres actually a delay that is dependent on a number of factors. First, to receive benefits, American citizens need to apply for benefits. The application process can take several months, so depending on when you apply, your Social Security Administration benefits may not begin until after you meet the age eligibility requirements.
Second, your first payment will typically not be credited until the first month after the month of your qualifying birthday. This is also the case if you opt to receive early retirement benefits, so no matter when you qualify, you likely wont see your first payment for at least a month until after the birthday month that qualifies you to receive benefits.
Do Social Security Increases Apply on Your Birthday?
Does Medicare Follow the Same Schedule?
Don’t Miss: Socaial Security
Beware The Social Security Earnings Test
Bringing in too much money in earned income can cost you if you continue to work after claiming Social Security benefits early. With what is commonly known as the Social Security earnings test for annual income, you will forfeit $1 in benefits for every $2 you make over the earnings limit, which in 2021 is $18,960. Once you are past full retirement age, the earnings test no longer applies, and you can make as much money as you want with no impact on benefits.
Any Social Security benefits forfeited to the earnings test are not lost forever. At your full retirement age, the Social Security Administration will recalculate your benefits to take into account benefits lost to the test. For example, if you claim benefits at 62 and over the next four years lose one full years worth of benefits to the earnings test, at a full retirement age of 66 your benefits will be recomputed — and increased — as if you had taken benefits three years early, instead of four. That basically means the lifetime reduction in benefits would be 20% rather than 25%.
Fact #: Social Security Is More Than Just A Retirement Program It Provides Important Life Insurance And Disability Insurance Protection As Well
Over 64 million people, or more than 1 in every 6 U.S. residents, collected Social Security benefits in June 2020. While older Americans make up about 4 in 5 beneficiaries, another one-fifth of beneficiaries received Social Security Disability Insurance or were young survivors of deceased workers.
In addition to Social Securitys retirement benefits, workers earn life insurance and SSDI protection by making Social Security payroll tax contributions:
- About 96 percent of people aged 20-49 who worked in jobs covered by Social Security in 2019 have earned life insurance protection through Social Security.
- For a young worker with average earnings, a spouse, and two children, thats equivalent to a life insurance policy with a face value of over $725,000 in 2018, according to Social Securitys actuaries.
- About 89 percent of people aged 21-64 who worked in covered employment in 2019 are insured through Social Security in case of severe disability.
The risk of disability or premature death is greater than many realize. Some 6 percent of recent entrants to the labor force will die before reaching the full retirement age, and many more will become disabled.
Recommended Reading: How Much Do You Receive For Social Security
When Your First Benefit Will Be Paid
Only 7% of people can actually receive their Social Security earned income for the calendar month of their birthday, and of that small group, none will collect the benefit during the calendar month of their birthday. This is due to the odd way that the Social Security Administration segments people based on their birthday, and SSA rules around schedule of payments.
It helps to know that the SSA considers you to be born 24 hours before you were truly born. So, if you were born on April 1, the SSA considers you to have been born on March 31. If you were born on April 2, it considers you to have been born on April 1. This is important because Social Security benefits are not paid for partial months in order to receive benefits for a given month, a beneficiary must be eligible for those benefits every day of that month.
Thus, for people who turn 62 in April, only those born on April 1 and April 2 are able to receive a benefit in the month when they turn 62. Otherwise, the first Social Security payment will be for the month of May.
But this is only part of the story, since receiving a benefit for the month of your birthday is not the same as receiving a benefit during the month of your birthday. Social Security benefits including earned, survivor and disability are paid a month late, meaning that a benefit that relates to the month of April will be paid out in May.
Waiting To Receive Social Security Benefits
If you delay receiving Social Security benefits until after your full retirement age, you will get benefit credits that increase the amount you receive once you do start. But that increase stops once you’ve reached age 70.
For example, if your full retirement age is 67, you would receive an 8% increase each year that you postpone receiving your benefits until you reach age 70. However, if you delay receiving your benefits, you must still apply for Medicare before age 65. You can start the process during your initial enrollment period. This period lasts seven months: three months before the month of your 65th birthday, the month of your 65th birthday and through the third month after your 65th birthday.
If you miss your initial enrollment or don’t enroll in Medicare Part B because you have coverage through work or a spouse, you may have opportunities to enroll later.
If you don’t sign up for Medicare Part B during your initial enrollment period and don’t have other coverage, you could be charged a penalty of 10% for each year you delayed enrollment once you do enroll.
Don’t Miss: Calculate Social Security Benefits At Age 70
Tax Considerations For Social Security Benefits
How do these tax considerations affect when you should apply for Social Security benefits? At todays , they may not have much of an impact on most people. Still, tax rates and income thresholds can change, so its worth remembering that you will lose less of your Social Security to taxes if you are in a lower marginal tax bracket when you begin to collect.
You should also note that if you decide to return to work, even part-time, and arent yet at your FRA, your Social Security benefits may be temporarily reduced. The reduction is $1 for every $2 of earned income over $18,960 in 2021 . During the year when you reach your FRA, your benefits will be reduced by $1 for every $3 in income over $50,520 in 2021 until the month when you become fully eligible. That money isnt lost, however. The SSA will credit it to your record when you reach your FRA, resulting in a higher benefit.
When Can You Collect Social Security
Many people still think of age 65 as the age to retire, but that has changed. To collect full benefits, you cannot apply for Social Security until you are:
- 66, if born in the 19431954 range
- 66 and 2 months, if born in 1955
- 66 and 4 months, if born in 1956
- 66 and 6 months, if born in 1957
- 66 and 8 months, if born in 1958
- 66 and 10 months, if born in 1959
- 67, if born in 1960 or later
If you delay retirement to age 70, then you will receive increased Social Security benefits. The percentage will depend on the year you were born, with a maximum 8% increase as the max. You can also choose to start collecting Social Security benefits as early as age 62, but your benefits will be reduced.
Recommended Reading: Maximum Age For Social Security
How Credits Are Earned
Since 1978, when you work and pay Social Security taxes, you earn up to a maximum of four credits per year.
The amount of earnings it takes to earn a credit may change each year. In 2021, you earn one Social Security or Medicare credit for every $1,470 in covered earnings each year. You must earn $5,880 to get the maximum four credits for the year.
During your lifetime, you might earn more credits than the minimum number you need to be eligible for benefits. These extra credits do not increase your benefit amount. The average of your earnings over your working years, not the total number of credits you earn, determines how much your monthly payment will be when you receive benefits.
Read our publication, “How You Earn Credits,” for more information.
How To Stop Social Security Check Payments
The SSA can not pay benefits for the month of a recipients death. That means if the person died in July, the check received in August must be returned. Find out how to return a check to the SSA.
If the payment is by direct deposit, notify the financial institution as soon as possible so it can return any payments received after death. For more about the requirement to return benefits for the month of a beneficiarys death, see the top of page 11 of this SSA publication.
Family members may be eligible for Social Security survivors benefits when a person getting benefits dies. Visit the SSA’s Survivors Benefits page to learn more.
Also Check: Social Secturity
Social Security Spousal Benefits
The spouse of a retired worker can receive up to half of their spouses benefits. This does not reduce the benefits that the spouse receives. This benefit is generally for spouses who do not have a sufficient work history to be otherwise eligible for benefits or whose work history entitles them to a lower benefit than they would receive from the spousal benefit.
To get Social Security spousal benefits, you must be one of the following:
- At least 62 years old
- Any age if you are taking care of your spouses child who is also receiving benefits
- A divorced spouse who is at least age 62, whose marriage lasted at least 10 years, and who remains unmarried
Depending on the date of birth, full spousal benefits kick in at the same age as a workers full retirement benefits. You can start taking benefits as early as age 62, but if you do so, then the benefit will be permanently reduced.
The spousal benefit continues until one spouse dies. The survivor then may be eligible for survivor benefits.
Earliest Normal Social Security Eligibility Age: 62
Even though you can begin receiving benefits as early as 62, that doesn’t mean you should start taking them at that age. This is primarily because you will receive reduced benefits. If you want a larger amount of guaranteed income later in retirement, then waiting to begin benefits until you are a few years older will make sense. Remember, even if you are retired, you can wait until you’re 70 to apply for Social Security so that you get a higher benefit. It is one of the best ways to make sure you have a higher amount of inflation-adjusted income later in life.
Also, if you take Social Security at this early age and you have earnings above the Social Security earnings limit, your Social Security benefits will be reduced. Once you reach full retirement age , there is no reduction in benefits for continuing to work, no matter how much you make.
You can apply for Social Security retirement benefits any time after you reach 62. Once you reach 62, think of it like open enrollment you can begin at any time and do not have to wait until another age cut off.
Read Also: Social Secrutity