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Social Security is the strongest pillar of the American retirement system. Almost every American pays into Social Security, which guarantees a steady stream of benefits in retirement.
As of March 2023, the average monthly Social Security check is:
- $1.833for a pensioner
- $898for a retired spouse
- $1483for the disabled
- $1711for the widow and $1,070 for the surviving child
Calculating your monthly Social Security contribution doesn't necessarily require math and takes less than 15 minutes. Just go toWebsite of the Social Insurance Institution, create an account and follow the instructions.
To help you understand the numbers provided by the SSA, we've rounded up the bases for calculating your Social Security benefits.
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Formula of Social Security benefits
social securitycalculates your benefits by adding up your highest income years and using simple arithmetic. To see your top earning years, create an SSA account and view your details.
The SSA sent people regular salary statements. Over the years, the practice has become sporadic as budget cuts and better Internet services have made sending paper statements to working Americans outlawed.
After logging in to your SSA account, go to your earnings history. At this point, you'll get an estimate of your benefits, but if you want to calculate it manually, you'll need to identify your best earning years.
Add up your income for each of the 35 years you made the most money and divide that amount by 420. The last number is the total number of highest earning months (35 x 12 months = 420). This gives you your Average Indexed Monthly Earnings (AIME).
Once you receive your AIME, follow the steps below.
- Multiply your first $1,115 AIME by 90%
- Multiply the portion of your AIME between $1,115 and $6,721 by 32%
- Multiply any AIME balance over $6,721 by 15%
- Add products from steps one, two and three to get yoursprincipal sum insured (PIA)
Your PIA isSocial Security Benefityou will receive in the so-called full retirement age, which is 66 or 67 depending on agethe year you were born. Your dependents may also receive a portion of PIA, which is listed in the Family Allowances section below.
An example of calculating social security benefits
For a simple example, let's say John earned $20,000 a year for exactly 35 years. His lifetime earnings were $700,000, which gives his AIME $1,666 - that's $700,000 divided by 420.
Over his lifetime, John has contributed $43,400 to the program - that's $700,000 x 6.2%data from OASDI, a payroll tax that funds Social Security.
Following the steps above, let's calculate John's PIA:
- 1115 USD x 90% = 1003 USD
- 551 USD x 32% = 176 USD
- Skip the third step because John's AIME isn't high enough
- Add products from step one and two - $1003 + $176 - for a PIA of $1179
This may seem low, but remember that Social Security was originally created as a system to prevent poverty in old age. It is designed to bring low-income workers closer to their starting income level. are less likely to access benefits such as pensions or save for retirement while working and earning low wages.
In this example, John receives $487 less each month than when he worked. But in just 36 months of paying benefits, John will receive as much from Social Security as he has paid into the system during his working career.
How to calculate family social benefits
Social Security pays benefits to dependents called supplemental benefits. It also pays survivors' pensions after the death of the main beneficiary.
In your SSA account, you can see the amount of benefits that your dependents or survivors are eligible for.
A qualifying spouse - whether still married to you or not - is entitled to up to 50% of your PIA. Your benefits will not be affected as long as the 50% is more than your spouse's base insurance amount.
In addition to your spouse, dependent children are entitled to 50% of your PIA. Dependent children are children who were under the age of 18 at the time of receiving the benefit, or adult children who became permanently disabled before the age of 22.
Your surviving spouse is entitled to 100% of your PIA at full retirement age, but this amount may be reduced or increased if you retire early or later.
The surviving child is entitled to 75% of PIA in the event of your death.
Auxiliary andFamily allowancesubject to the maximum amount of family benefits, with the exception of divorced maintaining spouses. Your maximum Family Allowance is shown in your mySSA account. To calculate it manually, you need to follow the steps below from PIA.
- Multiply your first $1425 PIA by 150%
- Multiply the amount of PIA between $1,425 and $2,056 by 272%
- Multiply the amount of PIA between $2,056 and $2,682 by 134%
- Multiply the amount of PIA above $2,682 by 175%
- Add products from steps 1 to 4 for max
An example of calculating family benefits from social insurance
Suppose Jane has a PIA of $2,400 when she dies, leaving four young children. Each survivor is technically entitled to 75% of their PIA, which would be $1,800 per month, but these benefits are subject to a family limit.
Following the steps above, let's calculate the maximum of Jane's family:
- 1425 USD x 150% = 2137 USD
- 631 USD x 272% = 1716 USD
- 344 USD x 134% = 460 USD
- Skip this step as Jane's PIA does not exceed $2682
- 2137 USD + 1716 USD + 460 = 4313 USD
Jane's survivors will split a maximum of $4,313 between her family, giving each of her four children $1,078 a month until they turn 18 or graduate from high school, whichever comes later.
How to calculate Social Security benefits
If you are married at retirement age or have been married for at least 10 years and have not remarried when you retire, you may be entitled to spousal support. you get onespouse's benefitonly if he pays more than you get based on your own earnings history. You can't choose.
Because Social Security gives you more benefits if you're on a low income, you're likely to get more on your own than as a spouse if you've worked outside the home for several years, even if your spouse earns much more than you.
If you're still married to your spouse, figuring out what you might get with your spouse's benefits is as easy (or difficult) as asking your spouse to sign up for a mySSA account and splitting their PIA 50%. This is the maximum amount you can receive as a spouse at full retirement age. You can ask the same question if you are no longer married to your ex-spouse, but you are still on good terms.
If you are in the process of getting divorced, you can request PIA information from your separating spouse through your solicitor. If you are already divorced and on bad terms with your ex, your only option may be to call your local Social Security office. You will need to provide your and your ex's Social Security information and explain that you want to assess your spouse's benefits.
If your PIA is over $1,813, you cannot get more as a spouse. The maximum PIA contribution for Social Security in 2023 is $3,627 (half of $1,813) for an individual who has earned the maximum Social Security taxable wage for 35 years.
However, keep in mind that during my SSA career, I had about 75,000 customer contacts and never met a single person with a PIA over $2,800. So if your PIA is over $1,400, it's a pretty safe bet that you won't get more as a spouse.
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FAQs
How do I determine my Social Security benefit amount? ›
Social Security benefits are typically computed using "average indexed monthly earnings." This average summarizes up to 35 years of a worker's indexed earnings. We apply a formula to this average to compute the primary insurance amount (PIA). The PIA is the basis for the benefits that are paid to an individual.
Is Social Security based on the last 5 years of work? ›We base your retirement benefit on your highest 35 years of earnings and the age you start receiving benefits.
How much Social Security will I get if I make $100000 a year? ›If your highest 35 years of indexed earnings averaged out to $100,000, your AIME would be roughly $8,333. If you add all three of these numbers together, you would arrive at a PIA of $2,893.11, which equates to about $34,717.32 of Social Security benefits per year at full retirement age.
How much Social Security will I get if I make $75 000 a year? ›If you earn $75,000 per year, you can expect to receive $2,358 per month -- or about $28,300 annually -- from Social Security.
What is the 5 10 rule Social Security? ›You must have worked and paid Social Security taxes in five of the last 10 years. If you also get a pension from a job where you didn't pay Social Security taxes (e.g., a civil service or teacher's pension), your Social Security benefit might be reduced.
How do I get the $16728 Social Security bonus? ›To acquire the full amount, you need to maximize your working life and begin collecting your check until age 70. Another way to maximize your check is by asking for a raise every two or three years. Moving companies throughout your career is another way to prove your worth, and generate more money.
What is the average Social Security check at age 62? ›Average Social Security retirement benefits in 2023
Average payments for all retirees enrolled in the Social Security program increased to approximately $1,827, according to the Social Security Administration (SSA). However, if you retire in 2023 at age 62, your maximum benefit would be much lower, $2,572.
What is the maximum Social Security benefit? In 2023, the maximum amount someone can receive in Social Security retirement benefits is $3,627 per month if they retire at 67. Someone who starts collecting benefits at age 62 can receive a maximum of $2,572 per month.
What is the highest pay out in Social Security? ›In 2023, the average senior on Social Security collects $1,827 a month. But you may be eligible for a lot more money than that. In fact, some seniors this year are looking at a monthly benefit of $4,555, which is the maximum Social Security will pay. Here's how to score a benefit that high.
What is the highest amount you can collect from Social Security? ›The maximum benefit depends on the age you retire. For example, if you retire at full retirement age in 2023, your maximum benefit would be $3,627. However, if you retire at age 62 in 2023, your maximum benefit would be $2,572. If you retire at age 70 in 2023, your maximum benefit would be $4,555.
What is the lowest Social Security payment? ›
The Social Security special minimum benefit provides a primary insurance amount (PIA) to low-earning workers. The lowest minimum PIA in 2023, with at least 11 years of work, is $49.40 per month. The full minimum PIA, which requires at least 30 years of work, is $1,033.50 per month.
Is it better to take Social Security at 62 or 67? ›You can start receiving your Social Security retirement benefits as early as age 62. However, you are entitled to full benefits when you reach your full retirement age. If you delay taking your benefits from your full retirement age up to age 70, your benefit amount will increase.
How much Social Security will I get if I average 80000 a year? ›Final pay of $80,000: benefit of $1,744 monthly, $20,929 yearly. Final pay of $100,000: benefit of $2,026 monthly, $24,315 yearly. Final pay of $125,000: benefit of $2,407 monthly, $28,889 yearly.
Where can I retire on $800 a month? ›Ecuador. If you're looking for a country where you can retire outside the US comfortably with $800 per month and experience one of the most ecologically diverse places in the world, then Ecuador might be for you. The go-to city for US retirees in Ecuador is Cuenca, which also happens to be a UNESCO World Heritage site.
Can I retire at 55 with $2 million? ›For example, you can calculate an $80,000 return for your $2 million retirement fund. As a result, your income at 55 will be $6,666 per month. Then, you'll increase this amount by 3% this year to combat inflation. Plus, you'll start collecting Social Security at 65 and estimate a $2,500 monthly benefit.
Where to retire on $4,000 a month? ›- If You Want Your Money to Go a Long Way: El Paso, Texas. ...
- If You Enjoy an Outdoorsy Lifestyle: Albuquerque, New Mexico. ...
- If You Want to Be Near the Beach: Sarasota, Florida. ...
- If You Crave Quality Arts and Culture: Colorado Springs, Colorado.
If you make approximately $50,000 per year and retire at 66, you will earn an average of $1,592 per month. However, if you were to choose to retire earlier, at 62 for example, you'd only earn an average of $1,075 per month.
Can you retire at 60 with 500k? ›The quick answer is “yes”! With some planning, you can retire at 60 with $500k. Remember, however, that your lifestyle will significantly affect how long your savings will last.
Can I draw Social Security at 62 and still work full time? ›You can get Social Security retirement or survivors benefits and work at the same time.
Can you get Social Security if you never worked? ›The only people who can legally collect benefits without paying into Social Security are family members of workers who have done so. Nonworking spouses, ex-spouses, offspring or parents may be eligible for spousal, survivor or children's benefits based on the qualifying worker's earnings record.
Do married couples get 2 Social Security checks? ›
To determine the amount of SSI benefits a couple is eligible to receive, their combined countable income is deducted from the FBR for a couple. The result is then divided equally and paid to the couple in separate checks.
Does the 4% rule take Social Security into account? ›The 4% rule and Social Security
You may be wondering how you include your future Social Security income in this equation, and the simple answer is, you don't. It wasn't designed to take that into account.
If you start receiving benefits at age 66 you get 100 percent of your monthly benefit. If you delay receiving retirement benefits until after your full retirement age, your monthly benefit continues to increase.
How much money can you have in the bank on Social Security retirement? ›SSA limits the value of resources you own to no more than $2,000. The resource limit for a couple is only slightly more at $3,000. Resources are any assets that can be converted into cash, including bank accounts. However, some assets you own may not affect eligibility for the program.
What is the average Social Security check at age 66? ›At Age 66-67
In 2022, the average Social Security check was around $1,720 for a 66-year-old and $1,845 for a 67-year-old. That's $20,640 to $22,140 a year.
According to data from the BLS, average incomes in 2021 after taxes were as follows for older households: 65-74 years: $59,872 per year or $4,989 per month. 75 and older: $43,217 per year or $3,601 per month.
What is the 4 rule for retirees? ›The 4% rule is a popular retirement withdrawal strategy that suggests retirees can safely withdraw the amount equal to 4 percent of their savings during the year they retire and then adjust for inflation each subsequent year for 30 years.
Is it smart to draw Social Security at 62? ›Waiting to claim your Social Security benefit will result in a higher benefit. For every year you delay your claim past your FRA, you get an 8% increase in your benefit. That could be at least a 24% higher monthly benefit if you delay claiming until age 70.
How much Social Security will I get if I make $200 000 a year? ›That works out to $3,538 in monthly Social Security benefits, after adding on delayed-retirement credits worth an extra 32%. You can see that Social Security doesn't replace a huge portion of earnings, but it's still a significant contribution.
Can you collect Social Security at 65 and still work full time? ›When you reach your full retirement age, you can work and earn as much as you want and still get your full Social Security benefit.
Will I get full benefits at 62 if I retire at 67? ›
Under current law, retirees get 70 percent of their full benefit if they claim at 62, 100 percent if they claim at 67, and 124 percent if they claim at 70 (with a sliding scale for every month between those ages).
How long does it take to get first Social Security check after applying? ›Social Security benefits are paid the month after they are due. If you tell us you want your benefits to start in May, you will receive your first benefit check in June.
Will I get Social Security if I only worked 10 years? ›Learn more about credits at www.ssa.gov/planners/credits.html. Although you need at least 10 years of work (40 credits) to qualify for Social Security retirement benefits, we base the amount of your benefit on your highest 35 years of earnings.
How much is the average monthly Social Security check? ›Social Security offers a monthly benefit check to many kinds of recipients. As of February 2023, the average check is $1,693.88, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.
Does everyone get the same amount of Social Security? ›Your retirement benefit is based on your lifetime earnings in work in which you paid Social Security taxes. Higher income translates to a bigger benefit (up to a point — more on that below). The amount you are entitled to is modified by other factors, most crucially the age at which you claim benefits.
What is the #1 reason to take Social Security at 62? ›1. You're Planning Your End-of-Life Care. Your Social Security benefits stop paying at your death, so if you die prior to collecting benefits, you'll have missed out on benefits entirely. You need to figure out how to maximize your Social Security income instead.
What is the highest Social Security check at age 62? ›- $2,572 for someone who files at 62.
- $3,627 for someone who files at full retirement age (66 and 4 months for people born in 1956, 66 and 6 months for people born in 1957).
If you earned around $50,000 per year before retirement, the odds are good that a $300,000 retirement account and Social Security benefits will allow you to continue enjoying your same lifestyle. By age 55 the median American household has about $120,000 saved for retirement, and about $212,500 in net worth.
What is the first year rule for Social Security benefits? ›A special rule applies to your earnings for one year, usually the first year you receive retirement benefits. Under this rule, you can get a full Social Security payment for any month you earn under a certain limit, regardless of your yearly earnings.
How much Social Security will I get if I make 80000 a year? ›And if your pay at retirement will be $125,000, your monthly benefits at the outset will be $2,407 for $28,889 yearly. Here's a summary tally of those starting benefits: Final pay of $80,000: benefit of $1,744 monthly, $20,929 yearly.
How much Social Security will I get if I make $50000 a year? ›
Suppose you were born on Jan. 1, 1960, and had an average annual income of $50,000. As of May 2023, you would get a monthly benefit of $1,386 if you filed for Social Security at 62; $1,980 at full retirement age (in this case, 67); or $2,455 at 70.
How much do you have to earn to get maximum Social Security? ›In 2023, if you're under full retirement age, the annual earnings limit is $21,240. If you will reach full retirement age in 2023, the limit on your earnings for the months before full retirement age is $56,520.
What is the 10 year rule for Social Security? ›You must have worked and paid Social Security taxes in five of the last 10 years. If you also get a pension from a job where you didn't pay Social Security taxes (e.g., a civil service or teacher's pension), your Social Security benefit might be reduced.
How much Social Security will I get if I make 120000 a year? ›The point is that if you earned $120,000 per year for the past 35 years, thanks to the annual maximum taxable wage limits, the maximum Social Security benefit you could get at full retirement age is $2,687.
Can you retire on 3000 a month? ›If you have a low living cost and can supplement your income with a part-time job or a generous pension, then retiring on $3,000 a month is certainly possible.
What is considered a high earner in Social Security? ›Consistently Earn a High Salary
In recent years, you need to earn a six-figure salary to get a top Social Security payment. The maximum wage taxable by Social Security is $147,000 in 2022.
The only people who can legally collect benefits without paying into Social Security are family members of workers who have done so. Nonworking spouses, ex-spouses, offspring or parents may be eligible for spousal, survivor or children's benefits based on the qualifying worker's earnings record.
What is the average Social Security check? ›According to the Social Security Administration (SSA), the average monthly retirement benefit for Security Security recipients is $1,781.63 as of February. Several factors can drag that average up or down, but you have the most control over the biggest variable of all — the age that you decide to cash in.