How Much Money Will I Receive From Social Security When I Retire
Calculate My Social Security Income
These days there's a lot of doom and gloom about Social Security'southward solvency - or lack thereof. And regardless of whether you think Social Security'south hereafter is secure, the fact remains that you lot shouldn't programme on living exclusively off your Social Security benefits. After all, Social Security wasn't designed to brand upward a retiree's unabridged income.
Withal, many people do discover themselves in the position of having to live off their Social Security checks. And even if you accept other income sources in retirement, Social Security can make upwards a significant office of your retirement income plan. That's why it'southward important to know all the rules surrounding eligibility, benefit amounts, taxation and more.
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Who Is Eligible for Social Security Benefits?
Anyone who pays into Social Security for at least xl calendar quarters (ten years) is eligible for retirement benefits based on their earnings record. You are eligible for your full benefits once you lot attain full retirement historic period, which is either 66 and 67, depending on when you were built-in. Merely if you merits later than that - you tin can put it off as tardily as historic period seventy - yous'll get a credit for doing so, with larger monthly benefits. Conversely, you lot can claim every bit early on every bit historic period 62, but taking benefits before your full retirement age will result in the Social Security Assistants 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 bodily benefits will depend on what age – betwixt 62 and seventy – you begin to claim them.
How Does the Social Security Administration Calculate Benefits?
Benefits likewise depend on how much money you've earned in life. The Social Security Administration takes your highest-earning 35 years of covered wages and averages them, indexing for aggrandizement. They give you a big fat "null" for each year you don't have earnings, and so people who worked for fewer than 35 years may see lower benefits.
The Social Security Administration likewise makes almanac Cost of Living Adjustments, even as yous collect benefits. That means the retirement income yous collect from Social Security has built-in protection against inflation. For many people, Social Security is the only grade of retirement income they have that is directly linked to inflation. It'south a big perk that doesn't go a lot of attention.
Is There a Maximum Benefit?
Yes, there is a limit to how much yous tin receive in Social Security benefits. The maximum Social Security do good changes each twelvemonth. For 2022, it's $4,194/calendar month for those who retire at historic period 70 (up from $3,895/month in 2021). Multiply that by 12 to get $50,328 in maximum annual benefits. If that'south less than your anticipated annual expenses, y'all'll need to accept additional income from your own savings to supplement it.
What If I Continue Working in My 60s?
Many people whose health allows them to go on 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 similar something you'd similar to practice, know that working after challenge early benefits may affect the amount you receive from Social Security. Why? Because the Social Security Administration wants to spread out your earnings and then you don't outlast them. If you merits Social Security benefits early and then continue working, you'll exist subject field to what's called the Retirement Earnings Examination.
If you're between historic period 62 and your total retirement age, and you're claiming benefits, you need to know about the Earnings Test Exempt Corporeality, a threshold that changes yearly. For 2022, the Retirement Earnings Test Exempt Amount is $xix,560/year ($1,630/month). If you're in this historic period group and claiming benefits, then every $2 yous make above the Exempt Amount will reduce by $1 the Social Security benefits you'll receive. (Note that but income from work counts for the Earnings Exam, so income from capital gains and pensions won't count confronting you.)
Contrary to popular belief, this coin doesn't disappear. Information technology gets credited dorsum to you - with interest - in the form of college future benefits. You lot may hear people grumbling about the Social Security "Earnings Tax", but it's not really a tax. It's a deferment of your benefits designed to keep you from spending also much too soon. And afterward you striking your full retirement age, you can work to your heart's content without whatever reduction in your benefits.
Are Social Security Benefits Taxable?
If you lot have a lot of income from other sources, upwards to 85% of your Social Security benefits volition be considered taxable income. If the combination of your Social Security benefits and other income is beneath $25,000, your benefits won't be taxed at all. The corporeality of your benefits that is subject to taxes is calculated on a sliding scale based on your income. Money that Social Security recipients pay in income taxes on their benefits goes dorsum into funding Social Security and Medicare.
If your retirement income is high enough that your benefits are taxable, how exercise you pay those benefits? Yous can ask Social Security for an IRS Voluntary Withholding Request Form if you'd like the government to withhold taxes from your Social Security benefits. Otherwise, yous're expected to file quarterly tax returns to pay these taxes over the grade of the year.
That covers federal income taxes. What most state income taxes? That depends. In 12 states, your Social Security benefits will be taxed as income, either in whole or in role; the remaining states do non tax Social Security income.
As y'all approach retirement, keep track of your expenses so you know how much income you lot'll need to maintain your electric current standard of living. While conventional wisdom says you don't have to plan on replacing 100% of your salary in retirement income, the loftier costs of medical care in retirement could result in you needing simply as much money as you lot did while you were working. Our advice? Aim high and salve equally much every bit you tin can.
It's a good idea to check back with a Social Security retirement income calculator periodically throughout your career. That way, you lot can see whether yous're saving enough for retirement in other ways (401(1000), IRA, etc.) to round out the money yous can expect from Social Security. The best bet is to contribute to your retirement accounts early on and generously—and not get overwhelmed by the mountain of money you'll need to save. Baby steps.
Source: https://smartasset.com/retirement/social-security-calculator
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