Are You Eligible for Social Security Benefits?
To be eligible for Social Security benefits, you must earn at least 40 credits throughout your career. This calculation of credits is complex, but you are likely eligible if you have worked for at least 10 years. You may also be entitled to spousal benefits based on 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 on this option.
When Will You Collect?
The Social Security Administration calculates your benefit amount at your full retirement age (FRA). This depends on your birth year. The full retirement age by birth year is:
- 1943-1954: Age 66
- 1955: Age 66 and 2 months
- 1956: Age 66 and 4 months
- 1957: Age 66 and 6 months
- 1958: Age 66 and 8 months
- 1959: Age 66 and 10 months
- 1960 and later: Age 67
You have the option to apply for early retirement at age 62. However, you may choose to delay receiving your benefits until age 70. There are many reasons why you might choose early retirement or delay it. This choice has a direct impact on the amount of your monthly payment. If you choose early retirement, you are opting for a lower monthly payment for the rest of your life. By choosing to delay your benefits to any year between your full retirement age and age 70, you will receive an increase in the amount.
Example of Maximizing Social Security Benefits
Let’s say you were born in 1965. Your full retirement age is 67. If you retire in 2032, you will receive your full benefit. However, if you retire at age 62 in 2027, you will receive only 70% of that amount. If you were born on the first of the month, the Social Security Administration calculates your benefit as if you were born in the previous month. For this example, let’s assume you earn the average annual salary of workers in the United States, according to the latest data from the Social Security Administration. This means your income is $53,383.18 per year. Using the Social Security Administration’s quick calculator, you will see that retiring at full retirement age in 2032 will give you $1,798 per month. However, if you retire at age 62 in 2027, you will receive $1,178 per month. If you decide to delay payments until age 70, you will receive $2,249 per month – almost double the amount you would receive if you retired early.
How to Calculate Your Social Security Benefit
Calculating your estimated Social Security benefit is not an easy task. Your best option may be to request a Social Security benefit estimate (Form SSA-7004) from the Social Security Administration. This document will contain an estimate of your benefits at age 62, at full retirement age, and at age 70, based on your current work history.
In addition to these estimates, the Social Security Administration also has a series of Social Security benefit calculators that can help you plan for retirement. You can also 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 did not use during your lifetime will be deposited into Social Security trust funds, which are used to pay all Social Security beneficiaries.
What income reduces Social Security benefits?
If you begin receiving Social Security benefits before you reach full retirement age, any income you earn above the annual limit until you reach full retirement age will reduce your benefit eligibility for that year. In 2022, if you are retired and have not reached full retirement age, the Social Security Administration will deduct $1 from your benefits for every $2 you earn over $19,560. In the year you reach full retirement age, the Social Security Administration will deduct $1 for every $3 you earn over $51,960. In tax year 2023, these limits are slightly higher, at $21,240 and $56,520 respectively.
How
Can I increase my Social Security benefits after retirement?
To increase your monthly benefit, do not start receiving Social Security payments when you reach full retirement age. The longer you wait, the higher the amounts you will receive monthly. If you want to get the highest possible amount from Social Security benefits each month, you should wait until age 70 to retire.
Source: https://www.thebalancemoney.com/how-to-calculate-your-projected-social-security-benefits-2894589
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