What Are Social Security Benefits?| How Much Will You Get When You Retire?

Social Security benefits are a major source of income for most seniors. Knowing what benefits to expect from Social Security and how much you will get is an important piece to planning for your retirement.

Don’t wait until you reach retirement age to start looking at how to maximize your social security benefits. Start researching now so that you are better prepared to enjoy this next phase in your life.

You have worked hard during your life and it is nice to see what monthly income you will receive for your efforts or where you will need more planning.

What Are Social Security Benefits?

Social Security is a government sponsored retirement program. Throughout the years as you work, you pay social security taxes on your income. Your employer also paid half of the social security taxes based on your earnings. If you are self employed, then you are responsible to pay the full 12.4% social security taxes.

It’s kind of a built in savings program for your retirement! Although, the taxes you pay throughout your employment is used for the current beneficiaries. Your benefits will come from the current working class in your retirement years.

How Much Will You Get Paid?

How much you will get paid each month depends on a number of things. It depends on how long you’ve worked, how much you earned, and how many “credits” you have accumulated. In order to qualify for Social Security Retirement benefits, you will need to have earned 40 credits throughout your career.

A credit is 1 point per amount earned to qualify for social security. Right now you earn 1 credit for every $1410 you earn with a cap of 4 credits per year. The dollar amount is adjusted each year for inflation.

The estimated average social security check in 2020 is $1503 per month. The maximum amount you could receive is $3011 a month for someone who files in 2020 and is at full retirement age.

Common Questions About Social Security Benefits

There are a lot of variables and strategies to collect your social security benefits. Follow these guidelines, but also work closely with a trustworthy financial advisor to identify your best strategy.

Who Is Eligible For Social Security Benefits?

There are three categories of people who are eligible to receive social security benefits.

Retired Workers– You become eligible for Social Security when you have had a job that paid social security taxes for at least ten years in order to reach your needed 40 credits. If you earn 4 credits for 10 years, you will have accumulated the 40 credits necessary to for basic eligibility.

Spouses– You may qualify for spousal benefits if you are the spouse of a retired worker. If you have divorced, you may also qualify for benefits with certain conditions outlined below.

Survivors– If your qualified spouse has passed away, you most likely will be eligible for social security survivor benefits.

How Is Your Social Security Benefit Calculated?

It all depends on how much you earned during your working years. When you apply for benefits, the Social Security looks at your highest 35 years of earnings. There is a ceiling amount of $137,700 earned per year in 2020. Any amount earned over that doesn’t get taxed by Social Security and doesn’t get figured into the formula.

The Social Security Administration keeps track of how much you make each year. They take your highest 35 years of earnings and apply a formula to arrive at the amount you will be eligible to collect at your full retirement age.

These are, however, estimates and can vary due to earnings not yet earned or if you continue to work after claiming benefits. They can also fluctuate due to the social security’s cost of living adjustments or changes in the law.

For more information you can check out the Social Security Administration website at www.ssa.gov or to speak with a representative at 1.800.772.1213.

What Is Full Retirement Age?

Full Retirement Age (FRA) is your age when you will receive full benefits from Social Security. The earliest you can collect Social Security retirement benefits is 62. When you collect before your FRA, it is considered early retirement and your benefits will be less each month.

Full Retirement Age varies depending on when you were born:

If you were born between 1943-1954, your FRA is 66 years old
Those born in 1955, your FRA is 66 and 2 months old
If you were born in 1956-1959 the age gradually increases each year
Those born in 1960 or later, your Full Retirement Age is 67

How Do You Maximize Your Social Security Retirement Benefit?

To receive your Full Primary Insurance Amount (PIA) each month, you will want to reach your full retirement age (FRA) if possible, to begin drawing from Social Security. Early eligibility begins at 62, but if you apply at this age, your monthly benefit will permanently be lowered by up to 30%. Meet with a Social Security financial advisor before making any big decisions and discover your options.

When Should You Apply?

At age 62, your benefits will be 70%-75% of your Full Primary Insurance Amount (PIA) depending on your birth year or Full Retirement Age (FRA). If possible, wait to apply for your benefits until you have reached your full retirement age.

You are permitted to wait to apply for social security benefits after your full retirement age. For each year you delay the start of your benefits past your full retirement age, your benefit will increase by 8% a year up to age 70 as a reward for waiting. You must, however, file by age 70.

Is Your Social Security Benefit Taxed?

Your Social Security Benefit may be taxed if your retirement income is over the base amount. The base amount is $25,000 in Social Security payments in a given year for singles and $32,000 annually for a married couple filing jointly.

Divorce and Social Security Retirement Benefits

Many people wonder if they can collect social security retirement benefits from their former spouse. The answer is yes if certain conditions are met.

You were married for at least ten years
You have not remarried
The divorce has been final for at least two years.You must be 62 years old
Your benefits would be lower than your spouses

If your ex hasn’t applied for benefits yet, but can qualify for them, you can receive benefits if you have been divorced for at least two years. If your ex would qualify when YOU turn 62, you can begin collecting on their benefits.

When requirements are met, and if divorced and not remarried, a former spouse can claim 50% off your ex’s benefits, or 100% if and when your ex passes away. YOu may collect spousal benefits on your ex’s earnings while putting off receiving your own benefits.

Spousal Benefits

Spouses are eligible for benefits based upon their spouse’s earning record. The spousal benefit is 50% of the wage earner’s benefit.

A non working spouse can collect the spousal benefit at the same time that the working spouse is collecting his own benefits. That means that a married couple can collect up to 150% of the working spouses benefit!

It is also possible for a lower earning spouse to benefit from the higher wages of her spouse. If your spouse earned more than you did throughout their career, you could be eligible for spousal benefits in addition to your own retirement benefits.

Survivor Benefits

No matter what their age when your spouse passed away, you can apply for survivor social security benefits when you turn 60. If you have reached full retirement age when you apply, then your survival amount is the full amount of what your spouse’s benefit would be. If, however, you apply before your FRA, your benefits will be reduced.

In order to qualify for survivor social security benefits, you must have been married at least 9 months before their passing.

Working In Retirement

Many people would like to continue to work in their retirement years. Some are passionate about working while others may need to work longer to make ends meet. There are some guidelines you may want to consider when making this decision.

If you have already applied for Social Security and then continue to work, your working income can negatively affect your benefits. In 2020, if you are still working and you start drawing from social security before you reach your full retirement age, you can expect to see a $1 reduction from your benefits for every $2 you earn over $18,240.

If you wait to begin drawing benefits during the same year that you reach FRA, the income limit is higher. The amount is $48,600. You can expect to see a deduction of $1 for every $3 you earn over that amount.

When you wait to reach your FRA to collect your Social Security benefit, you will keep all of your benefit amount no matter how much money you are earning.

What You Will Need To Apply For Social Security

You will want to round up these documents when you are ready to apply for your social security retirement benefits:

Your Social Security number
Birth Certificate
Proof of US citizenship if you were not born in the US
Military discharge papers if applicable
W2 or self employment tax return of the previous year
Your bank account information for direct deposit as Social Security no longer issues checks.
Your Social Security application form

The Last Thing You Need to Know About What To Expect From Social Security Retirement Benefits

As you can see there are many different strategies to draw your Social Security Retirement Benefits. Because there are so many options, it would be best to partner with a financial advisor to strategize which scenario will work best for your family to maximize your benefits.

There are software systems available to only financial advisors that can compare your options. When interviewing your financial advisor, be sure to ask if they have either the Social Security Analyzer or Social Security Explorer software. These tools will give you the most accurate options for you to consider.

Here are the next steps to take so that you can maximize your benefits:

Create an account with My Social Security to see your total earnings thus far in your career.
Interview for a financial advisor to maximize your earnings and know when to apply.
Plan for your future.

By knowing what to expect from your Social Security retirement benefits and having an idea of how much you will get each month when you retire, you can more accurately plan for your retirement.