"Get Your Social Security Benefit Verification Letter Online. Jim provides expert guidance for If youre below the first bend point, that would raise your PIA by $2.86* .9=$2.57, for an annual increase of about $31. Scroll down to the year of your first recorded earnings and see your bend points and estimated benefit at the bottom of the spreadsheet. Worst case scenario is after 2034; Soc Security gives you a 25% haircut. The SSA performs a similar calculation for all past years in which any contributions were paid. In 2022, the Social Security wage limit is $147,000. Sterlings first book, Lose Weight Save Money, can be purchased by clicking this link. ", Social Security Administration. *Please note that the calculation results are required to . That puts her well past the first bend point but still a long way from the second bend point. The Chase Ink Business Cash offers 5% back on up to $25,000 spent on cell and landline service, internet, cable TV, and at office supply stores. The taxes that fund Social Security come from the payroll tax, which is 6.2% for employees or 12.4% for self-employed individuals. I see as the years pass since retirement more accurate readings of future SS benefits- have already lost $900/mo in benefits by not working until 70. 9 Benefits Calculation Example For Person This book is narrowly-focused on divorcee Social Security strategies and rules. Otherwise, incomes between $25,000 to $34,000 may have to pay income tax on up 50% of their Social Security benefits. Formula Bend Points. To do this, add up the highest 35 years and divide by 35, or to get monthly amounts,take the sum and divideby 420 (35 years x 12 months) to arrive at your AIME. Use the most recently published bend points to convert your AIME into a PIA. You can get that maximum if you first claim benefits at your own full retirement age; the amount is reduced if you file earlier. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. For people born on January 1, the FRA is based on the year prior. I appreciate that you are still writing. Toll Free: 877-230-5500. Those amounts are indexed to the AWI, so they generally increase each year. Social Security Bend Points The Social Security benefits formula is designed to replace a higher proportion of income for low-income earners than for high-income earners. Your PIA is calculated at age 62. This manual is available onAmazon at this link. She (usually its the wife) receives max 50% of the benefits due at the recipients full retirement age, NOT age 70. Her benefit is now higher than 50% of mine, so at least we're getting something for those additional taxes we're paying. The earliest you can begin retirement benefits is age 62 (age 60 if you are eligible for a widow or widower's benefit on a deceased spouse's or ex-spouse's record). Multiply that by 35 years and you get $5,145,000. 2% back on first $25,000 combined at gas stations & restaurants. Any wages you earn after age 60 can increase your benefits, but they are assigned a NAWI table factor of 1.0000, which means they are not adjusted for future wage inflation. To do that, the formula uses what are called "bend points," which are adjusted for inflation each year. If you are not yet 62, your benefit calculation is only an approximation, as you do not yet know what the final bend point amounts for the year you turn 62 will be. What's the fastest you can get there? Note that she wont receive half of the benefit I can take at age 70, but rather half of the amount I would have gotten if I had started collecting at age 67, my full retirement age. Also available on Audible! Social Security Search Menu Languages Sign in / up. Cost-of-Living Adjustment (COLA) Information., Social Security Administration. The intention is to display ads that are relevant and engaging for the individual user and thereby more valuable for publishers and third party advertisers. Before you learn about bend points, it helps to understand how Social Security calculates your average indexed monthly earnings (AIME). Congressional Research Service. Any wages you earn after age 60 can increase your benefits, but they are not adjusted for future wage inflation. Benefit Calculation Examples for Workers Retiring in 2021, If You Were Born Between 1943 and 1954 Your Full Retirement Age Is 66, Fact Sheet Social Security, 2023 Social Security Changes, Fact Sheet Social Security, 2022 Social Security Changes, Full Retirement and Age 62 Benefit by Year of Birth, Social Security Benefits Early or Late Retirement. Cookies are small text files that can be used by websites to make a user's experience more efficient. Then the average of all indexed earnings from the 35 highest-income years (from the fourth column above) is factored into the calculation. Note that the spousal benefit is 50% of your benefit at full retirement age, NOT your benefit at age 70, so it's not quite 150% of your age 70 benefit. For example, let's say that a person wants to retire at 62, leading to a 60-month reduction from the normal retirement age of 67. Subtract the 2nd bend point amount from the total AIME amount and multiply the difference by 15%. In 2022, that amount is $147,000. 15% of $79 (the difference between $6,721 and $6,800) = $11.85, rounded down to $11.80. Could allow higher Equity exposure in investment portfolios. Technically, your PIA is calculated and rounded to the next lowest dime, and then any inflation adjustments are applied. Remember, you'll get some credit for your work prior to becoming an attending physician. Its possible that, over time, you and your employer together have paid more than $200,000 into the system on your behalf. She is now eligible for her own Social Security benefit. OK, let's get started then. $2,592,240/$147,000 = 17.6 years. Read our, Step 2: Calculate YourPrimary Insurance Amount (PIA). Primary insurance amount is a calculation, used with the average indexed monthly earnings (AIME), to determine a person's Social Security benefits. Social Security taxes. It goes from 90% credit to 32% credit to 15% credit to 0% credit. It already is paying out more in benefits than it collects in payroll taxes, and the trust fund it's relying upon to close the gap is expected to run dry in 2034, triggering an across-the-board 25% cut to benefits. To do this, the AIME is sectioned into three brackets (or segments) of earnings, which are divided by dollar amounts known as bend points. You should see the gender pay gap between Katie and I despite her working a lot more hours at WCI. Ill fix the post. Discounted offers are only available to new members. In addition, my wife will be eligible for at least 50% of my benefit. Summary: PWBM projects that Democratic presidential candidate Bernie Sanders' Social Security reform plan would reduce the program's conventional 75-year imbalance by 2.3 percent of current law taxable payroll, leaving a remaining imbalance equal to 1.2 percent of current law taxable payroll. In 2022, the second bend point comes at an AIME of $6,172 in today's dollars. His calculator is one of the best I have found. AARP. Quick question: if I am already maxing out social security tax on my income (full $147,000*0.124), is there any drawback to my wife making an income? Dana Anspach is a Certified Financial Planner and an expert on investing and retirement planning. I wouldnt say its a mistake, but I suppose it could be clarified a little. N/A . If you earn more than this amount, you can expect to have $1 withheld from your Social Security benefit for every $2 earned above the limit. However, you could attribute an assumed inflation rate to average wages to estimate the average wages going forward, and use those to create an estimate. That's up from $885 and $5,336, respectively, in 2017 because AWI increased by about 1.13% between 2015 and 2016. Average indexed monthly earnings (AIME) is used to determine the primary insurance amount (PIA) that values an individual's social security benefits. Unsurprisingly, the Physician on FIRE has spent some time thinking about this and has even developed a calculator to help you know when you reach each of the bend points. This reduction will still apply when he/she switches over to spousal benefits, as well as to his/her own benefits taken at age 62. Posted in: bend point, PIA, primary insurance amount, Social Security. For a full explanation, please see the postSocial Security and Early Retirement 2022: Know Your Bend Points! You can see current andhistorical bend points and the current year's bend points on the Bend Formula Bend Points page of the Social Security Administration's website. A spouse who qualifies for benefits on a workers record will receive half of the workers PIA, assuming they start benefits at their FRA. When you understand a few basic concepts, its not that difficult. These include white papers, government data, original reporting, and interviews with industry experts. I want you to pay attention to the general shape of the chart and to the axes. For 2022, the SSA established the first bend point as $1,024 and the second bend point as $6,172. Therefore, if you turn age 62 in 2018, then your earnings would be indexed to 2016's AWI, which is $48,642.15. Let's say you earned $42,305 in 2008 and you'll turn 62 in 2018. There are four ways to figure out your Social Security benefits: Visit a Social Security office to get an estimate, create an account at the official Social Security website and use its calculators, let the SSA calculate your benefits for you, or calculate your benefits yourself. Simply put, bend points are two points at which you receive diminishing returns in your benefit amount once you have reached a certain income threshold. You are caring for a child who is under 16 or disabled. My benefit at the time was $2,090.44. Sterling is also an adjunct professor teaching courses in math, finance, investments and insurance. Can I Collect Social Security While I'm Still Working? My wife doesnt have a strong earnings history, and if she doesnt qualify with 40 quarters, or if her benefit would be less than half of mine, she can file for Social Security at full retirement age (67) and receive half of my FRA benefit as long as Im still alive, and she would receive my full benefit if I happen to leave this world before her. The table above shows only a segment of the workers earnings (from 2009 to 2021) out of a work history that spanned 40 years. Someone born on January 1, 1955, will have an FRA based on 1954. For example if your AIME is $900, you would receive $810 (based on full retirement age). In December 2022, 734,601 Social Security beneficiaries, or about 1% of all beneficiaries, had their benefits reduced by the GPO. There are a number of variables to consider, but very often what makes sense is for the lower earning spouse (LES) to claim SS at age 62 based on their own earning record, and then switch over to the higher-earning spouses (HES) benefits at a later date, allowing the HESss benefit to increase based on delaying the claim. Click the link to choose the paperback version, or the Kindle version. Even if you are at full retirement age when you file for spousal benefits, your total monthly payment will be less than half of your spouses primary insurance amount, reflecting the fact that your initial Social Security claim came early. Your FRA can vary, depending on the year you were born. The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. The bottom 70 percent of newly eligible beneficiaries would receive the same benefits as under current law; the top 30 percent of newly eligible beneficiaries (those whose AIME was at or above the new bend point) would receive smaller benefits than under current law. Social Security's got a problem on its hands. The PIA and family maximum bend points from 1979 on shown in the following chart: To Link to this section - Use this URL: http://policy.ssa.gov/poms.nsf/lnx/0300605900 RS 00605.900 - List of RAW PIA and Family Maximum Computations - 11/10/2022 Batch run: 11/10/2022 11/10/2022 If you were born in the first 10 days of your birth month, then you receive payments by the second Wednesday of the month. The lower earning spouse will get the higher of either her/his own benefit or 50% of the higher earning spouses benefit at the higher earning spouses FRA. Social Security Benefit Amounts., Social Security Administration. The book is also available on Kindle, which you can find at this Kindle version link. Interesting that I learned that in between the time I wrote this post (like a year ago) and when it was published. The formula for the Primary Insurance Amount (PIA) is the basic benefit formula. For example, if I quit working today and began taking Social Security at age 70, I would get a benefit of about $2,600 a month. If you'd prefer, you can download this spreadsheet and others I've made for home use. You can find out more about our use, change your default settings, and withdraw your consent at any time with effect for the future by visiting Cookies Settings, which can also be found in the footer of the site. If you don't, you could end up disappointed with the amount of money you end up collecting from Social Security in retirement. If you choose to begin to receive benefits before you reach your full retirement age, one or both of the following calculations will apply: Therefore,if your FRA is age 66, your benefits would be reduced by 25% if you begin taking them at age 62. Market-beating stocks from our award-winning analyst team. Under this provision, you dont have a choice whether to wait and switch. Alternatively, you could get there in just 10 years if you earned $43,080 per year. Why buy an annuity? How many years of away was I (assuming I continue to earn more than the Social Security wage limit)? Theyre called bend points because they represent points on a graph of your AIME graphed by inclusion in calculating the PIA. Therefore, when calculating your PIA in 2018, Social Security will give you credit for 90% of your AIME up to $895, 32% of your AIME between $895 and $5,397, and only 15% for any AIME above $5,397. The benefit is reduced by 5/9 of 1% for each month before the normal retirement age (67), up to 36 months. The Social Security website has a full table. The bend points are inflation-indexed but only through age 62. Supplemental Security Income (SSI) If you received Social Security before May 1997 or if receiving both Social "Fact Sheet: 2022 Social Security Changes. It even has a calculator so you can tell the effect of early retirement (before FRA) on spousal benefits. https://www.whitecoatinvestor.com/single-income-versus-dual-income-families/, https://www.whitecoatinvestor.com/avoiding-the-second-income-trap-with-a-side-gig-for-the-stay-at-home-spouse/, https://www.whitecoatinvestor.com/whats-different-for-dual-income-couples/. The law states that we can store cookies on your device if they are strictly necessary for the operation of this site. ", Social Security Administration. Schedule of Social Security Benefit Payments 2022 Benefits paid on Birth date on. When calculating your AIME, Social Security adjusts your historical annual earnings for inflation using its average wage index (AWI). your Retirement, Education Funding, Well, you can get a quick estimate simply by taking $5,785 * 420 = $2,467,500 and subtracting my 35 years of indexed wages ($2,012,902) to get $454,598. Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. The first progressive feature is that up to 85% of Social Security income is taxed in retirement, but only if you have significant other income (defined as $34,000 single or $44,000 married filing jointly in total income, including the Social Security benefit). Before January 1, 2022, retirement plan sponsors will need to make sure to incorporate the new maximums, limits and thresholds into their software programs or spreadsheets. Table data source: Social Security Administration. "Receiving Benefits While Working. This formula is based on something called "bend points.". ", Social Security Administration. That includes if you file early for your retirement benefit say, at 62, as in this scenario and switch to spousal benefits later. The following factors go into the formula: Take a look at how these factors affect the benefits you will receive and how the Social Security Administration calculates its figures. The PIA is calculated by multiplying 90% times the AIME up to the first bend point in the formula, 32% times the portion of the AIME that falls between the first and second bend points, and 15% times the AIME over the second Social Security Administration. Find that figure by taking 5/9 of 1%, or 0.56; multiply by 36 months to get 20%. If you're curious, you can view historical AWIsand index factors on Social Security's website. Social Security benefits pay for the lion's share of the retirement of most Americans. In the table below, the highest 35 years are listed in Column G. Total the highest 35 years of indexed earnings, and divide that amount by 420, which is the number of months in a 35-year work history, to find the Average Indexed Monthly Earnings. Do Not Sell My Personal Information. "Benefit Calculation Examples for Workers Retiring in 2021. You will be sent a link to the file and a confirmation to receive notifications of new posts. Those born on the 11th-20th receive payments by the third Wednesday. Can I file for my Social Security at 62 and switch to spousal benefits later? Hear our experts take on stocks, the market, and how to invest. [], [] these bend points are adjusted by a formula that has been set in law since 1979, are based on wage-growth, and there is absolutely no changes to that formula in the gang of six plan, and the changes [], [] the Average Indexed Monthly Earnings or AIME) of $7,681. Notice that the index factor becomes 1.0000 in 2016, the year in which the worker turns 60, and it remains 1.0000 without changing for any future years of taxable earnings. Keep in mind that when your benefits start, the COLA will increase them annually. Your PIA is rounded to the next lowest dime, and your benefit amount is rounded to the next lowest dollar. Social Security benefits are payments made to qualified retired adults and people with disabilities, and to their spouses, children, and survivors. For example, Social Security and Supplemental Security Income (SSI) beneficiaries will receive a 8.7% COLA in 2023; they received 5.9% COLA in 2022, but the COLA was just 1.3% for 2020 and 1.6% for 2019. Social Security Administration. The bend points are published each year by the Social Security Administration. FREE Consultation NO ATTORNEY FEES UNLESS YOU WIN! Benefits Planner: Survivors | If You Are the Survivor., Social Security Administration. Now, if you delayed to age 70 instead of taking it at the full retirement age of 67, it would be 24% larger, or $52,660. Nowadays with more casual labor we have sorted out how to get poorer friends thru the Medicaid gap in our deep red state- if you dogsit another $2K worth, youll be able to afford health care!
