Thursday, June 16, 2022

When Should I Take Social Security Calculator

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Maximize My Social Security

Should You Take Social Security at Age 62 and Invest it?

Maximize My Social Security covers just about any Social Security claiming scenario you might end up with. This includes things like:

  • Child benefits for parents
  • Whether your spouse is getting benefits
  • Survivor benefits after a spouse’s death

This tool also accounts for the windfall elimination provision and government pension offset. This will affect you if you get a pension from an employer who didn’t withhold Social Security tax from your earnings. State employees, for example, may find this helpful.

Maximize My Social Security also provides links to topics and news about retirement. These come from many different sources.

This calculator costs $40 for a yearly household license.

Make sure you have your personal information ready to go when you first use this one. It asks that you input both your past and projected earnings. You can get this from your online or paper Social Security statement.

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.

Calculating Your Social Security Break

The timing of your Social Security benefits is important it could make a difference of tens of thousands of dollars in your retirement income over your lifetime. And though there are many factors to consider when evaluating Social Security benefits , its fairly simple to calculate your Social Security break-even age. Lets use an example to illustrate the calculation:

Our hypothetical subject, Jeff, has reached full retirement age and is deciding whether to begin collecting benefits now or to delay for one year. If he collects now, hell receive $1,000 per month. But if he waits to take his benefit, it will increase by 8% each year after his full retirement age . Therefore, if Jeff waits a year to apply for benefits, hell get $80 more, for a total of $1,080 per month. If Jeff decided to wait that year, how long would it take him to break even?

Essentially, Jeff forfeited $12,000 , but gained $80 a month. To find out his break-even age, Jeff would divide $12,000 by $80 a month, which comes out to 150 months, or 12½ years. So, if Jeff waits for one year to start taking his Social Security benefit, it will take him 12½ years to get back to even.

Based on the above, if Jeff thinks he’ll live more than 12½ years, it could make sense to delay taking Social Security, because he would eventually come out ahead. If not, he may want to take his benefits now.

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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.

Tax Considerations For Social Security Benefits

How to Check Your Social Security Statement  And Why You Should ...

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.

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The Retirement Age Could Go Up

In 1983, Congress raised the full retirement age to 67, a change that is still getting phased in today.

Some experts say bumping up the retirement age now is not out of the question, especially as many people work and live longer.

This change may be gradually phased in. Adjustments could also be made so those who are forced to retire at the earliest age of 62 don’t see a drastic reduction in benefits.

Still, advocates for expanding the program generally oppose this change because it is a benefit cut.

Taxes On Your Benefits

Your Social Security benefits may be partially taxable if your combined income exceeds certain thresholds. Regardless of how much you make, the first 15% of your benefits are not taxed.

The SSA defines combined income using this formula:

  • Your adjusted gross income + nontaxable interest + half of your Social Security benefits = your combined income

If you file your federal tax return as an individual and your combined income is $25,000 to $34,000, then you may have to pay income tax on up to 50% of your benefits. If your combined income is more than $34,000, you may have to pay tax on up to 85% of your benefits.

If youre married, filing a joint return, and your combined income is $32,000 to $44,000, then you may have to pay income tax on up to 50% of your benefits. If your combined income is more than $44,000, you may have to pay tax on up to 85% of your benefits.

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What If I Take Benefits Early

If you choose to receive your Social Security check up to 36 months before your full retirement age, be aware that your benefit is permanently reduced by five-ninths of 1% for each month.

If you start more than 36 months before your full retirement age, the benefit is further reduced by five-twelfths of 1% per month, for the rest of retirement.

For example, let’s assume that you stop working at age 62. If your full retirement age is 66 and 2 months you elect to start benefits at age 62, the reduced benefit calculation is based on 50 months. This means that the reduction for the first 36 months is 20% and 5.83% for the remaining 14 months. Overall, your benefits would be permanently reduced by 25.83%.

When Can I Start Collecting Social Security

How to Calculate Your Social Security Benefits

The minimum age to claim benefits is 62. If you are turning 62 and need the income from Social Security to support yourself, then you can start claiming your benefits now. However, if you have enough other income to keep you going until you are older, you may want to delay increasing the size of your monthly benefit.

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The Social Security Administration Website

This one is a no-brainer, but the Social Security Administration website provides a number of different benefit calculators there’s a tool to help you figure out when your full retirement age is and another that calculates how your earnings could impact your benefit amount.

The most useful tool that the Social Security administration has is the retirement estimator which calculates your monthly benefits from the administration’s own data on your earnings history. The closer you are to retirement, the more accurate the calculator will be because you’ll have fewer earnings years ahead of you.

However, most of the calculators on the Social Security Administration website don’t account for many factors in the calculation of your monthly benefit. If you have a spouse or other sources of retirement income that could affect the percentage of your benefits that are taxable, you may have to use multiple tools.

Timing And Your Health Coverage

Your health insurance coverage can also play a role in deciding when to claim Social Security benefits. Do you have a health savings account to which you would like to keep contributing? If so, note that if youre age 65 or older, then receiving Social Security benefits requires you to sign up for Medicare Part A, and once you sign up for Medicare Part A, youll no longer be allowed to add funds to your HSA.

The SSA also cautions that even if you delay receiving Social Security benefits until after age 65, you might still need to apply for Medicare benefits within three months of turning 65 to avoid paying higher premiums for life for Medicare Part B and Part D.

In 2022, the average monthly premium for Part D will be $33 per month versus $31.47 in 2021. If you enroll in a Medicare Advantage plan, the average monthly premium will be $19 per month in 2022 versus $21.22 in 2021. However, if you are still receiving health insurance from your or your spouses employer, you might not yet have to enroll in Medicare.

As of Oct. 16, 2021, Social Security offices are only open by appointment, and to get an appointment you need to be in a limited, critical situation. Most people will have to transact their business online, by phone, or through the mail.

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How Do I Increase My Social Security Benefits After Retirement

To increase your monthly benefit, don’t start taking Social Security payments right when you reach full retirement age. The longer you wait, the more you’ll get each month. If you want to get the highest possible amount of Social Security benefits each month, you need to wait until age 70 to retire.

Do You Plan To Continue Working In Your 60s

Should you tap your Social Security benefits early and invest the money?

Working in your 60s will help you maximize your income and savings.

Your benefits are based on your highest 35 years of earnings. Each year of work can add higher earnings to your record by replacing years with low earnings such as those when you were a student, were unemployed, or took time off to care for someone. When you work and wait to claim until age 70, you can increase your monthly benefit by more than 75 percent! Working in your 60s also gives you more time to save on your own for retirement.Review your earnings record on my SocialSecurity.

Working in your 60s will help you maximize your income and savings.

Your benefits are based on your highest 35 years of earnings. Each year of work can add higher earnings to your record by replacing years with low earnings such as those when you were a student, were unemployed, or took time off to care for someone. When you work and wait to claim until age 70, you can increase your monthly benefit by more than 75 percent! Working in your 60s also gives you more time to save on your own for retirement.Review your earnings record on my SocialSecurity.

You can maximize your benefits even if you work fewer hours or stop working.

You can maximize your benefits even if you work fewer hours or stop working.

Consider working in your 60s for an extra boost to your income and savings.

Consider working extra years in your 60s for an extra boost to your income and savings

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Why And How To Use My Spreadsheet

Using $1,200 as my estimated monthly benefit at full retirement, I calculate that I could collect the following amounts on a monthly basis:

  • Full Retirement: $1,200
  • Early Retirement: $840
  • Delayed Retirement: $1,488

At a glance, choosing to delay retirement seems like the best choice. More is better, right? But when I stop to think that starting earlier allows me to collect more checks overall, then I realize I need to consider the impact of getting cash earlier albeit in smaller amounts. In addition, I may want to consider the time value of money. That is, if I could invest these checks or get interest after depositing them in a savings account, my decision about when to start could be influenced.

I can use the Social Securitys calculator to determine how waiting or taking money early affects my monthly check.

But I decided to design a spreadsheet that could illustrate what all of my choices. In addition, my own spreadsheet lets me see how my start dates impact the total amount of money collected. Further, the spreadsheet could give me an idea of how long Id need to live in order to make waiting the better choice.

If youd like to buy my spreadsheet/course, you can peek at my calculations and see what you think. Ive also outlined my thought processes so you can design your own spreadsheet if desired.

There are three sheets associated with this spreadsheet

  • Calculations of monthly checks prior to full retirement age
  • Understanding How Your Benefit Amount Is Calculated

    Your Social Security benefits will be based on your average lifetime earnings, expressed as your primary insurance amount . Calculating your PIA is complicated because some factors used in the benefit formula change annually. Instead of calculating it yourself, its easiest to obtain a benefit estimate directly from the SSA .

    However, knowing how your PIA is calculated may be useful in benefit planning. Currently, the two PIA calculation methods most frequently used are:

  • The simplified old-start benefit methodThis method is used if age 62, disability, or death occurred prior to 1979. It averages actual earnings and uses a table to calculate the PIA.
  • The wage indexing methodThis method has been used since 1979. Indexing earnings is a way of adjusting them to reflect changes in wage levels throughout years of employment. This ensures that your benefits reflect increases in the standard of living. In general, the wage indexing method calculates your PIA by indexing your lifetime earnings up to and including the year you turn 59. Then, your highest earnings for a specific number of years are averaged and a benefit formula is applied to this figure to calculate the PIA.
  • Two other benefit computation methods are less frequently used:

  • Special minimum benefit tables are used sometimes to compute benefits payable to some individuals who have long periods of low earnings and who have at least 11 years of coverage.
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    At What Age Do You Plan To Retire

    The age at which you retire can have a major effect on the size of the Social Security benefits youll receive. The longer you wait up until age 70, the more benefits you may be able to collect.

    Enter the age at which you would like to retire and begin collecting benefits. You can get retirement benefits as early as age 62.

    What’s Full Retirement Age

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    Full retirement age is when you’re eligible to receive full Social Security benefits. Your full retirement age depends on your birth year: Under current law, if you were born in 1955 or later, your full retirement age can be anywhere between age 66 and 2 monthsall the way up to age 67 for those born after 1959. If you were born before 1955, you’ve already reached age 66 and full retirement age.

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    Social Security For Spouses And Survivors

    Spousal benefits are available to current or widowed spouses aged 62 or older. Applications for spousal benefits are not valid until the other spouse files for their own benefits. It is possible for a non-working spouse to be eligible for a spousal benefit based on their working spouse’s benefit. Based on the working spouse’s age of retirement, the spousal benefit can be up to half of the working spouse’s benefit.

    A widow or widower can collect a survivor benefit as early as age 60, given that the marriage lasted more than nine months. This requirement is waived if the widow or widower has a child under the age of 16. In the case where both individuals in a married couple are receiving SS benefits, and one dies, the widow or widower can continue receiving their own benefit or their spouse’s, but not both. It is also possible for a widow or widower to switch benefits in retirement. For instance, if the deceased spouse was scheduled to receive larger benefit amounts at age 70, the widow or widower can first file for their own benefits, then claim their former spouse’s benefits later in order to maximize payments.

    A person who is divorced, who was married for more than 10 years and has not remarried, can receive benefits based on their ex-spouse’s work history as long as the divorced person meets all of the following conditions:

    The ex-spouse’s benefits can also be claimed even if the ex-spouse has not filed for their own benefits, as long as both parties are above age 62.

    Why Did The Full Retirement Age Change

    Full retirement age, also called “normal retirement age,” was 65 for many years. In 1983, Congress passed a law to gradually raise the age because people are living longer and are generally healthier in older age.

    The law raised the full retirement age beginning with people born in 1938 or later. The retirement age gradually increases by a few months for every birth year, until it reaches 67 for people born in 1960 and later.

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