Bringing Cost Of Living Into The Equation
When you factor in the cost of living adjustment that SSA provides, there’s even a stronger case for George to wait. The SSA reasons that costs of living rise by 2% each year, and they reflect this as an increase in the monthly benefit checks.
So with this added bonus, George can expect the more true figures to be as follows:
- $479,047 if he started benefits at age 62
- $541,840 if he started benefits at age 66
- $567,416 if he started benefits at age 70
If George lives to age 82, he will collect the maximum amount of income over his full life by waiting until age 70 to begin taking his benefits. In George’s case, his break even age is 80. This means that if he waits until age 70 to collect, he must live to at least age 80 to receive the same total dollars he would have received if he started taking benefits earlier.
As you can see, there is a lot of money at stake. And of course, no one knows how long they’ll live with any certainty. But you can still make a solid choice about when to receive your Social Security benefit by weighing the many outcomes, as George did.
Wondering When To Take Social Security Use These Calculators To Find Out
There are a lot of reasons why people may not be able to wait until 70 to start taking Social Security. These can include health issues, the inability to find work and even overwhelming debt.
If you cant wait until 70, its best to at least wait until your full retirement age to claim your benefit. to find your full retirement age.
Meanwhile, there are a lot of free calculators available to help figure out the best time to take Social Security based on your individual circumstances.
Calculating Your Average Indexed Monthly Earnings
List your every year income. Your Social Security advantage is primarily based totally on your common listed month-to-month income . You can calculate this with the aid of using searching at your annual profits every 12 months. Make positive you best consist of the part of your profits that became difficulty to Social Security tax.
- Your protected profits consist of profits from employment for that you have been paid an hourly salary or salary, plus self-employment profits.
- The simplest manner to get the facts you want is to installation an account on-line with the SSA. From there you may get your Social Security declaration and affirm your income.
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How Does Social Security Calculate Your Age
We base Social Security benefits on your lifetime earnings. We adjust or index your actual earnings to account for changes in average wages since the year the earnings were received. Then, Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most.
What Is Full Retirement Age
In addition to how much youve earned over the years, the size of your monthly Social Security benefit depends on when 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|
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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, then your Social Security benefits may be temporarily reduced. The reduction is $1 for every $2 of earned income over $18,960 . During the year when you reach your FRA, your benefits will be reduced by $1 for every $3 in income over $50,520 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.
Tapering Of Benefits Calculator
The Tapering of Benefits Scheme is intended to introduce persons in receipt of Unemployment Assistance , Social Assistance and Social Assistance for Single Unmarried Parents to employment. Tapering of Benefits is given for a 3 year period to those beneficiaries who become engaged in employment or also as self-occupied, as long as they earn the national minimum wage or more. In case of SUP beneficiaries, they can also be eligible if they work part-time.
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What Does Aarps Social Security Benefits Calculator Do
The calculator provides an estimate of your Social Security benefits, based on your earnings history and age. Our tool also helps you see what percentage of daily expenses your payments can cover, and how you can increase your benefits by waiting to collect. It can also tell you how your retirement earnings will be affected if you keep working after you claim your Social Security benefit.
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.
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Is There A Maximum Benefit
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.
How Is Your Retirement Benefits Calculated
The Social Security Administration calculates how much you will receive looking at various factors. But the two main inputs that will determine your future benefits are your average income over your career and your age when you retire.
In order to be eligible to receive retirement benefits you must earn up to 40 credits, the maximum number that you can receive each year is 4, so you will need to work at least 10 years. However, some people take longer to earn those credits and that doesnt take into account the second factor.
The Social Security Administration will also calculate the average of the 35 highest-earning years of your career. If you work for less than 35 years the number put into the equation for years without earnings would be zero, thus bringing down your average. Note that you dont get more than 40 credits even if you earn them in 10 years and keep on working.
Great news for Social Security beneficiaries! Social security benefits will increase 5.9 percent in January due to a cost-of-living adjustment. For more information about the increase, visit .
Rep. Donald Payne Jr
Are You Eligible For Social Security
To be eligible for Social Security benefits, you must earn at least 40 credits over your working career. How those credits are calculated is complex, but you will likely qualify if you have worked for at least 10 years.
You may be entitled to a spousal benefit because of your partner’s work history. If your spouse, ex-spouse, or deceased spouse has earned 40 credits, you may qualify. The Social Security Administration provides more info about this option.
But your work history is not only used as part of the qualification criteria it is also used to figure out the amount of your payment. In calculating your monthly retirement benefit, the SSA considers your highest-earning 35 years of work history. If you worked for less than 35 years, the SSA will use zero for some years.
The higher your earnings over those 35 years, the greater your contribution to the program through FICA taxes, and the higher your benefit will be.
The same threshold applies to both your earnings and your benefits. This amount is $142,800 in 2021.
Aarp’s Social Security Benefits Calculator
AARP offers a free calculator that is easy to use. It shows how earnings from work can reduce your benefits if you claim before you reach full retirement age. It also gives you a summary of the claiming strategies you can follow.
One major downside is that, while you can access the summary, you can’t dig into the data behind it. That could frustrate you if you want to make informed choices about all your options.
The site does offer extra advice in the form of links to some hot topic articles.
This calculator can be a good starting point for planning your retirement. It may not be the best way to decide on a good action plan. But it is visible and easy to access. It’s also offered by an organization that is widely known and trusted.
In many ways, you get what you pay for with these tools. You might prefer to pay for a benefits calculator to make sure you find out about all the options you have. On the other hand, a free tool might be just what you’re looking for if you want some simple advice spelled out clearly.
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.
An Example Of Taxed Benefits
Lets say you receive the maximum Social Security benefit for a worker retiring at FRA in 2021: $3,148 per month. Your spouse receives half as much, or $1,574 a month. Together, you receive $4,722 a month, or $56,664 per year. Half of that, or $28,332, counts toward your combined income for determining whether you have to pay tax on part of your Social Security benefits. Lets further assume that you dont have any nontaxable interest, wages, or other income except for your traditional individual retirement accounts required minimum distribution of $10,000 for the year.
Your combined income would be $38,332half of your Social Security income, plus your IRA distributionwhich would make up to 50% of your Social Security benefits taxable, because youve exceeded the $32,000 threshold. Now, you may be thinking, 50% of $56,664 is $28,332, and Im in the 12% tax bracket, so the tax on my Social Security benefits will be $3,399.84.
Fortunately, the calculation takes other factors into account, and your tax would really be a mere $225. You can read all about the taxation of Social Security benefits in Internal Revenue Service Publication 915.
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Heres Another Longevity Calculator Thats Worth A Look
It includes questions about your age and physique, life events, fitness and lifestyle. Youll get a customized life expectancy based on 400,000 data samples from the National Institutes of Health.
An Advanced Claiming Strategy
If you or your spouse reached age 62 by the end of 2015, you qualify for a Social Security claiming strategy called restricted application.
Here’s how it works: The younger spouse claims Social Security benefits based on his or her own earnings record.
When the older spouse reaches full retirement age , he or she files a restricted application for spousal benefits only. At that point, both spouses are claiming benefits based on the younger spouse’s earnings record.
Then, at age 70, the older spouse claims benefits based on his or her own earnings record, which have increased to 132% of what that spouse would’ve been eligible for at FRA.
See how it works:Restricted application
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How A Social Security Break
Figuring out the right time to start taking Social Security benefits isnt always a straightforward process. A Social Security break-even calculator can help you get some perspective on the numbers so you know what you stand to gain or lose by taking benefits earlier versus later.
Social Security break-even calculators help you find the best age to start taking retirement benefits. They do this by comparing your cumulative Social Security retirement benefits paid at age 62, your full retirement age and at age 70 and estimating how long it would take the benefits paid at age 70 to break even with benefits paid starting at age 62.
Heres a simple calculation to give you an idea of how a Social Security break-even calculator works. Say that you have the option to begin receiving $1,200 a month in benefits at age 62. Youd receive $1,700 in benefits if you wait until full retirement age at 66. Or you could receive $2,200 a month in benefits by delaying them until age 70.
The break-even point represents when the cumulative benefits even out. So if you wait until age 70 to start taking benefits, it would take you until age 79 to break even with the benefit amount youd receive if you started taking them at age 62. If you were to start receiving benefits at age 66, it would take you until age 75 to break even with the benefits youd receive if you started them at 62.
The Conventional Wisdom Is To Wait As Long As Possible But That Isnt Always The Best Advice
One of the most complicated and consequential decisions in retirementwhen to start collecting Social Securityhas been transformed by online calculators.
The conventional wisdom says that you should wait to claim benefits as long as possible, to maximize your payments. But one size doesnt fit all, and peoples circumstances are often different than the standard assumptions about expected lifespan and career plans.
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What If I Change My Mind
If you receive Social Security benefits at a reduced rate, but then change your mind, you have the option of withdrawing your application and paying back to the government what you’ve already received . Then, you could restart benefits at a later date to take advantage of a higher payout. But you are limited to one withdrawal per lifetime.
For example, let’s say you elected to receive early benefits at age 62, but then decided to go back to work at age 63. You could withdraw your Social Security application within the first 12 months of receiving benefits, pay back the years worth of benefits you received, go back to work, and then wait until a later age to restart your benefit checks at a higher level.
For important details about repaying benefits please read the SSA publication If You Change Your Mind.
Full Retirement Age Affects The Amount Of Your Benefits And More
Full retirement age is the age at which you can claim your standard Social Security benefit, or your primary insurance amount , from Social Security. Your PIA is the standard amount you can expect to receive based on your inflation-adjusted average wages earned throughout your career. Full retirement age is 66 for those born in 1954 and 67 for those born in 1960 or later — it varies depending on your birth year.
It is important to know your full retirement age, as it affects when you can claim Social Security without reducing your benefits, the amount of delayed retirement credits you can earn in order to raise your benefits, and how much you can earn from working while receiving Social Security without forfeiting any of your benefits.
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