How Much Social Security You’re Entitled to Depends on Your Lifetime Wages and Other Factors
When it comes to retirement, one thing on most people’s minds is how much Social Security they’ll get when they finally get to stop working. The main factor in determining this value is the overall wages earned in a lifetime, starting back from when wages were first taken from your paycheck. Here are a few ways to determine it and other factors that go into calculating the amount.
What You’ve Made in a Lifetime
When the Social Security Administration calculates the monthly amount to pay out, they first look at the average amount made in a lifetime. This means looking at all earnings from when the person initially started working to the very last work date. This is used to determine the Average Indexed Monthly Earnings, or AIME. For example, if someone worked on and off for 35 years or longer, but made about $30,000 a year and then for 5 years made around $60,000 the amount will be calculated based the overall total made in a working lifetime.
When Retirement Is Collected
The average retirement age is 66 years and 6 months. But the earliest one can claim retirement is age 62. Choosing to not wait until 66, results in a reduced amount rather than the maximum amount at age 66. The longer one delays collecting, the more the monthly benefit payment will be.
Disability Could Play a Factor
Another way to tap into social security benefits is if someone is deemed disabled by a medical doctor. The individual needs to have a minimum number of credits worked to be eligible for SSDI or social security disability income. SSI or supplemental social security is different. It’s a low-income option for disabled people based on income and not credits.
Retirement Age Calculator
The Social Security Administration has a handy retirement age calculator anyone can use. This helps determine a ballpark amount of what the monthly benefit payment will be. A social security retirement benefit is also referred to as a primary insurance amount or PIA. When determining the amount, SSA takes into consideration a person’s average earnings along with any cost-of-living adjustments.
Working and Claiming
An eligible person can claim benefits early as age 62 or they can keep working after age 66. If they choose to keep working past retirement age, they can claim full benefits no matter what their annual income is. Another option is to delay receiving retirement benefits. Keep in mind this can’t be done beyond age 70.
This is an option for those who want a bigger benefit package or have to meet their required credits needed to get a check. A minimum of 40 credits across a lifetime of working are needed to begin eligibility for SS benefits. So the amount of time worked over the years is important if that threshold hasn’t passed yet.
Retirement doesn’t have to be complicated. Now is the best time to start planning ahead on what the best options are and how to achieve financial goals well before the last day of work.
~Here’s to Your Financial Health!