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How Much Money Will You Have in Your Social Security Retirement Check and How Much Can You Keep? For retirees, these are burning questions.
Even retirees who continue to work can count heavily on this long-awaited monthly benefit.
Here we take a look at the deciding factors behind the size of your check and how much goes in your purse or pocket.
1. Your work history
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What your “retirement age” means is quite specific to Social Security. You can stop working and throw all the retirement parties you want, but as far as Social Security is concerned, your retirement age isn’t when you leave work, but when you take Social Security benefits. start taking.
To calculate the size of your monthly benefit check, the Social Security Administration (SSA) uses a formula that takes into account:
Your 35 Highest Earning Years When You Start Receive Social Security Benefits
The SSA explains more on “your retirement age and when you stop working.”
2. Your Earnings History
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The size of your Social Security check also depends on the amount earned in each of those top 35-income years.
The formula measures earnings, not work. So, maybe you worked at home, raised children or looked after elders. Without those years’ earnings, you are at a loss.
When you don’t have 35 years of earnings, Social Security assigns a $0 value for each non-earning year. $0 years reduce your benefit amount, so it’s in your favor to earn the most income out of those 35 years.
Working more than 35 years can’t hurt this calculation. In fact, you can increase your monthly retirement check if:
You combine earning years to replace zero-income years You replace low-income years with high-income years
The SSA details the “Social Security benefit amount.”
3. When You Were Born
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Your birth year is an important milestone for Social Security. Your year of birth determines your “full retirement age,” a benchmark for your benefits set by the Social Security Administration.
For those born between 1943 and 1954, the full retirement age is 66 years.
To keep Social Security financially sound, Congress took steps in 1983 to gradually raise the full retirement age. As a result, if you were born in 1960 or later, your full retirement age is 67. If you were born between 1954 and 1960, you can see your full retirement age in this SSA chart.
4. Your Age When You Claim
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Social Security allows retirees to claim benefits and receive retirement checks at age 62.
But you may not earn the full amount at that time; You must wait until your full retirement age. Claiming too soon reduces your monthly benefit amount — permanently.
If you wait longer than your full retirement age, you can increase your Social Security benefit. It is also permanent.
The SSA’s chart of “Delayed Retirement Credits” has details. Typically, you add to your monthly benefit for each month you stop claiming it by age 70.
Your monthly benefit can increase by a maximum of 8%; You’ll get that if you wait until your 70th birthday before claiming benefits. There is no point in waiting any longer; Growth stops at that age.
5. A Spouse Who Worked
You may be able to get more out of your work record from Social Security. How? By claiming “spouse benefits”.
If your spouse earns (and is receiving benefits) from you, you may be eligible for a higher payment — up to half of your spouse’s “primary sum insured,” depending on whether he or she At what age do you claim Social Security?
You must generally be at least 62 to do so. The benefit increases if you wait until full retirement age.
Spouse benefits may be available in some cases if you have a child under the age of 16 or who receives SSI disability payments.
There are restrictions and requirements. Learn more about Social Security benefits for a spouse.
6. State of the Economy
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Once you receive a Social Security check, your monthly benefit is usually fixed.
But inflation hurts people on fixed incomes, so Social Security legislation tries to compensate with automatic cost-of-living (COLA) adjustments — a percentage increase in monthly benefits.
These COLAs are based on the national rate of inflation. When inflation is flat, the annual COLA is minuscule — or sometimes 0%. These days, with inflation being high, COLA growth is on the rise.
Scroll down on this page to see Social Security COLAs since 1975.
7. Do you keep working
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Working provides an exception to the rule of thumb that Social Security payments are settled after you claim benefits.
Working after you start collecting benefits can increase your Social Security payments. Your benefit formula is recalculated once a year to include your new income.
“If your latest year of earnings is one of your highest years, we recalculate your benefit and pay any increases you owe,” the SSA says. That’s because, with each year of higher income, Social Security replaces the year with lower income in the formula.
However, there is a “but”. If you’re under full retirement age, you can temporarily reduce your benefits if you earn too much at work.
When you reach full retirement age, the penalty ends, and your benefit amount is adjusted to compensate for the period for which benefits were withheld.
This retirement income calculator lets you test scenarios. SSA’s “Getting Benefits While Working” explains and gives more examples.
8. Do you have other income
Do You Have to Pay Taxes on Your Social Security Retirement Income? Perhaps.
If your income is less than $25,000 for a single filer or less than $32,000 for a couple filing jointly, you won’t pay any federal income tax on your benefits check, as the SSA states here.
Otherwise, your profits are taxed – up to 50% or 85% of the total amount. How much tax you pay depends on how you file federal taxes and on your income from other sources.
9. Where do you live
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The IRS isn’t the only one wanting a piece of your benefits check. If you live in one of the 12 states that tax Social Security benefits, you may also have to pay state income tax on your benefit checks.
Rules differ. Some states follow federal rules for taxing Social Security. As this AARP roundup of states’ rules says, others have their own point of view.
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