How do you know exactly how much you will get from Social Security in retirement | Smart Change: Personal Finance
It’s hard to know how much you should save for retirement when you don’t know how much you’ll get from Social Security. You might try planning for retirement without these benefits if you have an easy time saving time, but for most people, that’s not realistic.
Determining the exact size of your monthly Social Security checks may not seem realistic to those who don’t understand how the government calculates your benefits. Fortunately, it’s a lot easier than you might think, and there’s no need for math.
The answer is just a few clicks away
It may take the average person a long time to manually estimate Social Security benefits using government equations, but fortunately, this is not necessary. You can quickly find out the size of your checks by creating your own Social Security account.
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This is a free service. You will need some basic personal information such as your date of birth and Social Security number. You will also have to answer some identity verification questions, and you may need to enter a confirmation code sent to you via email or text message.
Once you’ve done that, you’ll be taken to your account page, where you can see if you qualify for Social Security based on your work history to date. You can also request replacement Social Security cards if necessary and review your earnings history. This shows how much you paid in Social Security taxes each year.
But the most valuable tool in my Social Security account is the Benefits Estimator. It enables you to see how much you will earn from the program if you sign up during any given month between your 62nd and 70th birthday. The longer benefits are deferred, the higher your checks until you reach your maximum benefit at 70.
The calculator also enables you to see how your monthly benefits may change based on changes to your future salary. If you’re expecting a salary increase, for example, you can take that into account to see how much your paychecks will grow.
If you’re married, you can also find out what kind of spousal benefit you might get if your partner qualifies for Social Security. But you need to know what their estimated monthly benefit is at full retirement age (FRA). FRA is anywhere from 66 to 67 for today’s workers, depending on the year of birth. You can find out by having your partner create their own Social Security account.
But it can’t tell you the best time to claim
The Benefits Calculator is a useful tool for estimating your monthly benefit, but it can’t tell you when to sign up to claim your greatest lifetime benefit. You must decide for yourself, most often it comes to life expectancy. Claiming early means more years of checks, but each smaller check, while delaying leads to larger but fewer checks.
If your goal is to claim the greatest lifetime benefit, you can figure out the best starting age by using some basic math. First, take your estimated monthly gain and multiply it by 12 to get the estimated annual interest. Next, multiply that by the number of years you expect to claim the checks. For example, a benefit of $2,000 per month will give you $24,000 per year. And if you claim for 20 years, you’ll get $480,000 overall.
Repeat this process for some claimed ages to see which gives you the most benefit overall based on your life expectancy. Then try to postpone the claim until this age. If this is difficult for you financially, you may have to register earlier than you would like.
Another thing worth noting is that all of the data that the benefits calculator provides depends on how the government calculates Social Security benefits at the moment. It is possible that the government will change the program in some way in the coming years to maintain its continuity for future generations. If this happens, you may need to repeat the above process based on the new benefits estimates.
Once you know how much you can expect from Social Security in retirement, you can start calculating how much you need to save yourself. Don’t forget to review this information annually to make sure you’re on the right track, and be prepared to adjust your Social Security claim strategy as necessary if your retirement plans change.
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