In fact, the issue of accumulating money for retirement has several important questions that arise in practice. One likely is, “How much am I going to get from Social Security?” Did you learn how you can benefit from your benefits? To help you get an understanding of Social Security and its benefits this article will explain how the benefits are computed, factors that cause a change in the benefits awarded and finally even how one can increase their benefits.
Social Security Benefits
But, now let’s take a look at what Social Security benefits are before going further and detailing how much you can get. Social Security among them is a government program intended to aid retirees, disabled persons, and the surviving dependents of dead workers. The compensation you are to receive is derived from your working record plus the money you contributed to the system depending on your Social Security taxes during your lifetime earning.
Amount of Social Security Benefits: What Determines Your Benefit?
How is your Social Security benefit calculated? Computation of your Social Security benefit is multi-factorial. Two main criteria in computing your benefit include your lifetime earnings and the age at which you retire.
Your Work History Matters
This is your AIME of the highest earnings during your 35 working years used to compute your Social Security benefits. Provided you do not work for 35 years, an average will include zeros, which can lower your amount of monthly benefit. So, it is highly important that you work for at least 35 years to earn as much as you can through Social Security.
How does your age affect your benefits?
The other element that will decide this is, the age at which you start receiving your check as your benefit. It is possible to start social security at the age of 62 but doing that means your benefits will be permanently low. You can delay your benefit past what is known as full retirement age, typically 66 or 67 depending on when you were born, to get a larger monthly check. In real life, for every year you delay beyond your full retirement, your benefit increases about 8 percent a year. That continues through age 70.
Sneaky Tricks to Get More out of Social Security
Social Security, although seemingly simple, offers various strategies to receive higher monthly payments in order to gain the maximum lifetime benefits. Let’s discuss a few of the ways you can maximize your Social Security benefit.
Holding Off on Retirement for Maximum Benefits
If one waits until age 70, that is among the best ways to get better benefits. If you can wait, your check is going to be considerably higher if you waited until age 62. This may be a great strategy if other income streams are available during early retirement years.
Spousal Benefits and Survivor Benefits: Things You Must Know
Another lesser-known strategy is spousal or survivor benefits. Married couples can receive between 50 percent and 100 percent of a spouse’s benefit-if that amount is greater than the worker’s benefit. Aside from ordinary retirement benefits, you can also claim survivor benefits if your spouse passes away and in some instances receive as much as 100 percent of the income that your spouse was receiving. Knowing such options will really get the most out of Social Security.
Estimation of Your Social Security Payments
Want to estimate your Social Security payments? Don’t worry-there are tools and resources that will help you do so.
Using the Social Security Calculator
The Social Security Administration has an online benefits calculator on which you can feed in your earnings history. It is easy and efficient, thus providing you with a clearer picture of what you would stand to gain when you retire.
Full Retirement Age vs Early Retirement
In most instances, one will find that it is often better to compare taking benefits at full retirement age versus taking them early. Drawing benefits early means drawing less money, and waiting until after full retirement age increases payments made into your Social Security account. A long-term calculation of these decisions is a significant part of any retirement planning.
Taxes and Social Security Income
Surprise. You may have to pay tax on your Social Security benefits. Depending on other income you might bring in at retirement, between 15 and 85% of your benefits might be subject to federal income tax. This can make a difference in your strategy for creating retirement income.
Common Mistakes When You Apply for Your Social Security Benefit
Applying for Social Security can be easy but has pitfalls that cost highly. Here are a few to be on the lookout for:
- You withdraw benefits too soon without regard to long-term implications.
- Not factoring in taxes on your benefits.
- Overlooking spousal or survivor benefits.
Avoiding these pitfalls can help ensure you get the maximum possible payout.
