It can be difficult Predict how much you will receive social Security, Especially if you are more than a few years away from retirement. But familiarizing yourself with how your benefits will be calculated can help you budget for retirement and even your future Social Security payments.
Estimates of how much you will get from social security in retirement are as follows:
- Consider the average payout.
- Calculate your social security payments.
- Factor in your retirement age.
- Decreasing medical premium.
- Remember stop income tax.
- Create My Social Security Account
Read on to find out how your Social Security payments are determined.
Consider the average social security payment
Average Social Security benefit was $ 1,543 per month in January 2021 Maximum possible social security benefits For someone who’s full retirement age in 2021 is $ 3,148. However, to receive this Social Security payment an employee must earn a maximum taxable amount over a 35-year career, which is currently $ 142,800 for 2021.
How to calculate your social security payment
Social Security payments are calculated using the 35 highest-earning years of your career and are adjusted for inflation. If you work for more than 35 years, your lowest-earning years are removed from the calculation, resulting in higher payouts. Those who do not work for 35 years have zeroed in the Social Security calculation and receive small payments.
“When it’s time to calculate your benefits, the Social Security Administration will look at your highest 35 years of earnings, and earnings before your 60th birthday will be indexed to inflation. – Meaning that while your earnings may be higher than your career, the money you earn this year may not be the year of your highest earning after indexing, “Jim Blenkship, at Blenkship Financial Planning in New Berlin Certified Financial Planner says. Illinois, and author of “A Social Security Owner’s Manual”.
For a worker who becomes eligible for Social Security payments in 2021, the benefit amount is calculated by multiplying the average indexed monthly income of $ 996 by 90%, the remaining income by 32% by $ 6,002, and over 15%. Earns $ 6,002. The sum of these three amounts, which is equal to the nearest 10 cents, is the initial payment amount. Cost of living adjustment And delayed retirement credits can increase your payment above this amount.
Factors in your social security retirement age
When you start Social Security your age plays a big role in your payment amount. If you claim payment before your full retirement age, your monthly Social Security benefit is reduced, which is usually age 66 or 67, depending on the year of your birth. You can increase your monthly payment for a delay in claiming between your full retirement age and 70 years of age.
Married couples have more claiming options. Married persons are eligible for social security payments equal to 50% of high earning Spouse paid If it exceeds payment based on his work record. If you claim them before your full retirement age, the spousal payment is reduced. If you get married for at least 10 years, you can claim payment based on the work record of an ex-husband. The spouse can claim the survivor’s payment if the high-earning spouse passes away first. Couples must coordinate when they claim payment to maximize their benefits as a couple and potentially qualify for higher payments for the surviving spouse.
Medical premium reduction
Many retirees are his Medicare Part B Premium His social security check was cut. The standard Medicare Part B premium in 2021 is $ 148.50 per month. Medicare Part B payments are prohibited by law from reducing Social Security payments for existing beneficiaries, so Medicare Part B premium increases may not exceed your annual Social Security costs by giving adjustments.
“Some people may see that their Social Security check goes down not because of their Part B premium, but because of their Part D drug premium,” says Tricia Neumann, director of the program on Medicare policy at the Kaiser Family Foundation. “A catch in the Part D program is not a harmless provision.” The Medicare Part D premium varies depending on the plan you choose, and you are eligible to change plans each year during the open enrollment period.
Remember income tax withholding
Many retirees have to pay Income tax on their social security Payments, especially if they have other sources of retirement income. “If Social Security is your only source of income, you don’t pay any tax on it,” says Dana Unspatch, a certified financial planner and CEO of Sensible Money in Scottsdale, Arizona. “If you have other sources of income, such as pensions, IRA withdrawals, part-time work, interest and dividends, that income flows into the IRS formula, and the result is somewhere between zero and 85% of your Social Security benefits. Happens. Are subject to taxation. “You can choose 7%, 10%, 12% for income tax or 22% of your Social Security payments.
Create My Social Security Account
You can get a personal estimate of your future Social Security benefits in different claimed eras My social security account. These estimates are based on your actual earnings history and are most accurate for those approaching retirement age. Your estimates can change from year to year, especially if you have a significant salary change or lag in your income history.
“By creating my Social Security account you can view your most recent Social Security details, which show your annual reported income, your full retirement age, projected retirement, disability and family (benefits) and more,” Angie Says Furuboton-Lorosse. A Certified Financial Planner at Away Financial Planning in Richland, Washington. “You will want to look at your earnings history every two years to ensure that no errors occur and keep an eye on your projected retirement benefits.”
You can also use one Social security calculator To help you determine the maximum age to sign up for payment based on your personal situation.