Everybody hopes to get a decent chunk of Social Security change when they reach their senior years. After all, we spend our adult lives paying into the system, so it’s only fair that we get back some of that money in retirement.
Not everyone will see a hefty Social Security check, however, and we certainly won’t all get the same benefit. That’s because our benefit amount isn't just determined by how much we’ve worked overall, but also by how much we were paid for that work.
With that in mind, it’s time to stop living paycheck to paycheck and start thinking of how to build your future Social Security payment. Here's what you can expect to get from Social Security, and how you can maximize your payments.
What determines your actual Social Security payment?
The longer you work and the more you earn each year, the more you can expect to receive from Social Security.
Aside from the length of your employment history and your lifetime earnings, your Social Security payments are also affected by how old you are when you apply to receive benefits.
In fact, your monthly payments can be permanently slashed if you take benefits too soon.
If you draw on Social Security before you reach full retirement age (anywhere from 66 to 67, depending on your birth year), your monthly benefit will be reduced. Conversely, if you wait until after your full retirement age to receive Social Security, your monthly benefit amount will increase.
Benefit increases end after you turn 70, though, so there is no point in delaying further at that age.
What’s the most you can receive from Social Security?
There is a cap on Social Security payments. You can work 40 hours a week for four decades straight, earn a multi-six figure salary, and wait to claim benefits until age 70 — and you’ll still only get so much money back.
For 2022, the highest possible retirement benefit amount ranges from $2,364 to $4,194, depending on how old you are when you retire.
Social Security payments do rise regularly. You’ll see this referred to as a COLA, or cost of living adjustment. Annual COLA increases help offset the impact of inflation.
What’s the average Social Security retirement benefit?
Unsurprisingly, most people won’t receive the highest possible Social Security benefit. In fact, as of May 2022, the average payment for retirees is a bit more than $1,600 per month.
As we have mentioned, many factors — from the length of your work history to the amount of your lifetime earnings at the point you file for benefits — impact this amount.
As a result, you may need to find some creative ways to supplement your Social Security.
How can you calculate your expected payment?
To estimate your future Social Security benefit, use the Social Security Quick Calculator. This will give you a snapshot view of your anticipated benefit amount based on your current earnings and expected retirement date.
For a more comprehensive assessment of your Social Security estimate, sign up at the Social Security Administration website for a ”my Social Security” account. Calculations made through your account automatically consider your work history, so they’re more personalized and potentially more accurate.
Just like the Quick Calculator, you can input different values to see how your benefit amount may go up or down — an invaluable feature when it comes to retirement planning.
How else can a “my Social Security” account help you plan?
Creating a “my Social Security” account at the SSA website isn’t just useful for retirement preparations. This personalized account comes with a bunch of ways to help boost your bank account.
In addition to estimating your anticipated retirement payments, you can also calculate spousal benefits, view what you would receive in disability benefits, and see how much your family would get in survivor’s benefits.
You can also use this account to apply for retirement or disability benefits and to order a replacement Social Security card should yours be lost or stolen.
Registering for a “my Social Security” account doesn’t take long, and the investment of time is a small price to pay for the depth of information you’ll get as a result. The retirement estimates alone are well worth the effort.
Are Social Security payment estimates guaranteed?
As helpful as it is to have these calculators at your fingertips, keep in mind that the estimates they provide aren’t set in stone.
For example, if you haven’t worked very long or don’t yet have the experience or expertise to command a higher salary, there is still room for you to increase your expected payment.
However, there also is some unsettling uncertainty hanging over the future of the Social Security program. In the 2022 Social Security Trustees report, the SSA cautioned that, unless Congress takes substantial action, Social Security funds will begin to run out in 2035. If nothing changes, the government would only be able to pay 80% of scheduled benefits at that point.
In other words, the benefit amount you estimate today may end up being substantially less than what’s available when you retire.
How can you increase your expected Social Security benefit?
Even with a cap on Social Security retirement benefits and even with concerns about the future of Social Security as a whole, you can still take steps to maximize your payments.
First, try to work for at least 35 years, and don’t let your pay stagnate. Your monthly Social Security payment considers your highest earnings over 35 years of employment.
If you want a bigger monthly check, put off receiving benefits until at least your full retirement age, and preferably until age 70. However, remember that waiting to file for Social Security benefits is not the best idea for everyone. Talk with a financial adviser or another professional to find out which approach is best for you.
When it comes to Social Security payments, how much you receive depends in large part on how much you’ve worked and how much you’ve earned. While you can estimate your benefit amount now, remember that this is just an estimate and not a guarantee.
If you’re still working, utilize other retirement savings vehicles, like 401(k)s and IRAs, to add to your anticipated Social Security payments. Make sure you plan early for your golden years so you can avoid wasting your money in retirement.
No matter where you are in your financial journey, remember that you are your best and most reliable resource for securing a comfortable retirement.
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