How to Estimate Your Social Security Benefits

Social Security plays a vital role in the retirement planning of nearly every American. Yet it can be hard to guess how much you should expect from Social Security after you retire. By using some simple tools that are available, though, you can estimate how big your Social Security benefits will be when you need them.

Doing the hard math to get the exact answer

If you want to know exactly what to expect from Social Security, you'll have to do a lot of legwork. To come up with the number, the Social Security Administration takes your entire work history, indexing your annual earnings for inflation and then choosing the 35 highest-earning years. Then, the SSA adds up those annual earnings for the 35 top years and then finds the average indexed monthly earnings.

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After you have that number, you'll run it through a formula that differs depending on your age. For example, if you're turning 62 in 2017, then your benefit equals the sum of the following:

  • 90% of the first $885
  • 32% of the amount between $885 and $5,336
  • 15% of the amount above $5,336

The result is the primary insurance amount, which is what your monthly benefit will be if you retire at full retirement age. If you retire early, then your benefits will be reduced. If you retire later, then you can get higher benefits.Delayed retirement credits for taking benefits past full retirement age amount to 8% per year, while the penalty for taking benefits early ranges from 5% to 7% per year.

Get the SSA to help you make your best guess

The Social Security Administration has created several calculators to try to make it easier to come up with reasonable estimates of what your benefits will be. In particular, four calculators can give you benefit estimates with varying degrees of sophistication and precision:

  • The Social Security Quick Calculator makes simple assumptions about your past and future earnings to give you a basic look at your estimated retirement benefit based on your current earnings. If your earnings have been relatively stable throughout most of your career, then this calculator gives a good estimate.
  • The Online Calculator offers more precision by letting you input your past work history. The calculator still has to make assumptions about the future based on what you've made in the most recent year. However, the actual work history makes a more accurate estimate possible than the simple calculator's basic assumptions.
  • If you don't want to type in your information yourself, the Retirement Estimator does some of the legwork for you. It accesses your Social Security work history directly to fill in blanks about your earnings. But it doesn't work well if you're currently receiving benefits based on another person's work record.
  • The Detailed Calculator is the most sophisticated SSA tool. It gives information about both future and past retirement benefits, and dependent and survivor benefits are also available in addition to benefits based on your own work history. Still, you won't get a complete picture of how any other benefits integrate with your own.

Finally, one place where you can always get a basic estimate that's tailored reasonably well to your past work history is from your Social Security benefits statement. The SSA now mails out paper statements only once every five years, but you can always access yours via the internet from the mySocialSecurity website.

Until it's actually time to file, you can't know for certain how much your Social Security monthly benefits will be. Yet by looking at estimates, you'll likely get close enough to be able to make good plans about your retirement finances.

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