Do you know the amount of monthly benefits that you should expect to receive from Social Security when you retire? The formula for calculating benefits is not as simple as totaling up your income levels or Social Security taxes paid into the system.
How to Predict Your Social Security Payout
To get a baseline for your benefits, the Social Security Administration (SSA) indexes your earnings throughout your career to account for the changes in wage values over time. The highest 35 years of indexed wages are averaged and used to determine your primary insurance amounts (your benefits) through yet another formula. Further adjustments are made depending on things such as the age at which you plan to draw benefits relative to your full retirement age. That's quite a process just to determine your monthly benefits.
Fortunately, you do not have to calculate your future benefits all by yourself — you can use the benefits estimator on the Social Security Website. As long as you have enough Social Security Credits built up to qualify for benefits but are not currently receiving benefits or waiting for a decision regarding benefits and/or a Medicare application, you can get a rough idea of your benefits with the benefits estimator.
Obviously the closer you are to drawing your benefits, the better your estimate will be — but even in the later years, changes can affect your benefits. If you are counting on a large salary in your pre-retirement years to raise the 35-year average, a job loss a few years before you can afford to retire can put a dent in your benefits.
Once you verify your identity and put in your personal information (name, mother's maiden name, Social Security number, birthday, etc.), click "Submit" and you will be directed to put in the necessary information for the benefits estimator to work. Do not worry about digging out salaries from years past; your wages are already present through Social Security records.
One downside to the site is that it has an older-style database format. You must use the "Next" and "Previous" buttons to navigate the site to enter your information, so be sure to locate the cursor before adding any information. Using the "Enter" key, as you usually would for entries, will cause problems with the estimator. Similarly, using the back button on your browser or closing the browser without exiting the program can cause your session to end.
For security reasons there are also time limits on each page, although you will be notified that your time is about to expire as you near 25 minutes without activity. You have three warnings before your session times out and the entries on that page are lost.
Is your situation a little more complicated with things like the application of the Windfall Elimination Provision or the presence of secondary pensions, disability benefits, or spousal benefits? The SSA website has a page full of helpful calculators to fit your needs. One is an extremely simple and anonymous version of the estimator, using only your current salary and date of birth.
If you register for a My Social Security Account, you have access to the estimator at any time as well as a full statement of your benefits. If you plan to check regularly, it is worth signing up for an account to take advantage of other helpful tools — and perhaps use the account to seek advice if you do not like the answer you get from the estimator. Either way, the SSA is available to help.
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