How Much Social Security Will You Get?
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If you are a typical U.S. worker nearing retirement, you have been shoveling money into the Social Security system through payroll or self-employment taxes for decades. It’s possible that, over time, you and your employer together have paid more than $200,000 into the system on your behalf. If you also figure in the time value of money on these contributions, your total contribution to the system could be twice as much. Now the time is approaching to turn the tables and determine what the Social Security Administration (SSA) owes you.
How to Estimate Your Social Security Income
Two facts are known—Social Security benefits are not guaranteed, and some changes will be necessary to keep the system solvent in the future as millions of baby boomers retire and begin to receive their Social Security benefits. Though these facts create uncertainty, it’s also true that the quality of your retirement depends on your planning—and you must start planning somewhere.
A good starting point is to figure out the dollar amount of the retirement benefits to which all of your years of Social Security contributions entitle you under current law. There are four ways to do this:
- Visit a local Social Security office to get a record of your taxed Social Security earnings and an estimate of retirement benefits (though it won’t take into account future earnings or other changes that could impact your monthly payouts).
- Visit the Social Security website and use one of its online benefit calculators to determine your retirement estimate based on your earnings record.
- Wait until you decide to start receiving benefits, and let the SSA calculate the amount for you. However, this doesn’t help you plan, and though the SSA can usually be counted on to determine benefits accurately, mistakes are sometimes made.
- Calculate your own benefits using the step-by-step process described in this article. When you understand a few basic concepts, it’s not that difficult. One advantage of calculating your own benefits is that you can make decisions and consider trade-offs, such as whether you can afford to retire early or how much you can increase your benefits by continuing to work.
On March 17, 2020, all Social Security offices were closed completely due to the COVID-19 pandemic. As of October 14, 2021, they are open, but the website states that most Social Security services do not require a visit to an office. People may also transact their business online, by phone, or through the mail.
Calculate My Social Security Income
These days there’s a lot of doom and gloom about Social Security’s solvency – or lack thereof. And regardless of whether you think Social Security’s future is secure, the fact remains that you shouldn’t plan on living exclusively off your Social Security benefits. After all, Social Security wasn’t designed to make up a retiree’s entire income.
Still, many people do find themselves in the position of having to live off their Social Security checks. And even if you have other income sources in retirement, Social Security can make up a significant part of your retirement income plan. That’s why it’s important to know all the rules surrounding eligibility, benefit amounts, taxation and more.
Who Is Eligible for Social Security Benefits?
Anyone who pays into Social Security for at least 40 calendar quarters (10 years) 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 – you’ll 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: You’re eligible for Social Security Benefits if you’ve paid into the system for at least a decade, but your actual benefits will depend on what age – between 62 and 70 – you begin to claim them.
Average Social Security Payment by Age
The average Social Security retirement benefit is significantly lower than the maximum. It was 800,539.68 per month in May 2022, according to the most recent data available from the SSA. Here’s what the average benefit looks like at different ages for those who started collecting at FRA, according to an annual report published by the SSA in 2021.
To ensure benefits maintain their buying power, the SSA adjusts them every year in accordance with changes in the cost of living, For example, the cost-of-living adjustment (COLA) was increased by 5.9% for 2022, compared with a 1.3% increase for 2021.
According to the Social Security Administration (SSA), the maximum monthly benefit paid at full retirement age (FRA) in 2022 is $3,345. Bear in mind that this is the maximum benefit at FRA, but you can defer your benefits and increase your Social Security benefit. Here are two examples:
What Are Delayed Retirement Credits?
If you wait past your FRA to collect Social Security retirement benefits, you’ll receive credits for each month that you delay, up to age 70. These credits can increase your monthly payment by 8% a year.
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