Although Social Security is merely one part of a secure retirement plan, it ‘s helpful to get a rocky theme of how much you can expect. If you ‘re eligible for Social Security, your monthly benefit is based on two factors :
- How much money you earned during your working career
- The age you choose to start getting payments
Let ‘s look at how each of these affects your future Social Security income .
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 building 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 ( SSA ) provides more information about this option. But your work history is not only used as part of the qualification criteria ; it is besides 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 sum is $ 142,800 in 2021, and it will raise to $ 147,000 for the 2022 tax year.
When Will You Collect ?
The SSA calculates your benefit come at your fully retirement senesce ( FRA ). This depends on the year you were born. FRA by parturition year is :
- 1943–1954: age 66
- 1955: age 66 and two months
- 1956: age 66 and four months
- 1957: age 66 and six months
- 1958: age 66 and eight months
- 1959: age 66 and 10 months
- 1960 and later: age 67
The monthly amount you are eligible to receive at your FRA is considered your full benefit, but it is not your minimum or utmost profit. You have the option to file for early retirement a early as long time 62. But, you may choose to delay taking your benefits until arsenic late as age 70 .
There are many reasons why you might choose to take early retirement or to delay it. That choice has a direct impact on the come of your monthly requital. If you opt for early retirement, you are choosing a lower monthly payment for the rest of your life. By choosing to delay your benefit to any age between your FRA and age 70, you lock in an increase .
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Let ‘s say that you were born in 1965. Your FRA is 67. If you retire in 2032, you will receive your full benefit. however, if you retire at long time 62, in 2027, you will receive only 70 % of that sum .
If you were born on the beginning of the month, the SSA calculates your benefit as if you were born during the former calendar month. For this example, suppose that you earn the average annual wage for U.S. workers, per the latest data from the SSA. That would put your wages at $ 53,383.18 per year .
Using the SSA ‘s Quick Calculator, you ‘ll see that retiring at your FRA in 2032 would entitle you to $ 1,776 per calendar month. however, retiring at 62 in 2027 would bring in $ 1,178 monthly. If you were to delay payments until senesce 70, you would receive $ 2,249 each month—nearly double over the sum you would get at early retirement .
Although your payment increases every year in retirement due to the annually cost-of-living allowances, these increases are constantly based on the previous year ’ mho sum. indeed once you take a deoxidize benefit, all of your future payments will be smaller .
How To Calculate Your Social Security Benefit
Calculating your estimated Social Security benefit is no easy tax. Your best count may be to request a Social Security benefits estimate ( Form SSA-7004 ) from the SSA. This will contain an estimate of your benefit at senesce 62, at your FRA, and at age 70, based on your current work history .
In accession to these estimates, the SSA besides has a series of Social Security benefits calculators that can help you plan for retirement. You can besides use this calculator from AARP to estimate the best age to start claiming your benefits .
frequently Asked Questions ( FAQs )
What happens to unused Social Security benefits?
Any benefits you do n’t take during your life will go into the Social Security trust funds, which are used for paying all Social Security recipients.
What income reduces Social Security benefits?
If you start taking Social Security benefits before you reach broad retirement age, any income you earn over the annual limit until you reach full retirement senesce will lower your benefit eligibility for that year. In 2021, if you are retired and have n’t reached entire retirement age, the SSA will deduct $ 1 from your benefits for every $ 2 earned over $ 18,960. In the year you reach fully retirement senesce, the SSA will deduct $ 1 for every $ 3 earned over $ 50,520. For the 2022 tax year, these thresholds are slightly higher, at $ 19,560 and $ 51,960, respectively.
How do I increase my Social Security benefits after retirement?
To increase your monthly benefit, do n’t start taking Social Security payments correctly when you reach entire retirement age. The longer you wait, the more you ‘ll get each calendar month. If you want to get the highest potential amount of Social Security benefits each month, you need to wait until age 70 to retire.