Emily Guy Birken, John Schmidt. Contributor, Editor. Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but that doesn't affect our editors' opinions or evaluations. How Is Social Security Calculated? How Your Inflation-Indexed Earnings Are Calculated Inflation-adjusted average earnings—officially referred to as your average indexed monthly earnings AIME by the Social Security Administration—adjust and standardize your income across your peak earning years.
Other Factors That Impact Your Social Security Benefits Though your earnings history determines your base Social Security benefit, the amount you actually get in each monthly check is influenced by the following factors: When You Choose to Start Taking Social Security Benefits The year—and even the month within that year—that you choose to begin taking Social Security benefits affects how much you receive each month. Medicare Taxes are not the only potential withholding from your benefits check.
Continued Employment If you continue to work, your benefit may also be reduced. Inflation Your benefits may actually increase from year to year. Retirement Planner Use Personal Capital's Retirement Planner to calculate how much you would need to save for your retirement. Get Started. Was this article helpful?
Share your feedback. Send feedback to the editorial team. Rate this Article. Thank You for your feedback! Something went wrong. Please try again later. Our Guides To Retirement. Retirement More from. By Kat Tretina Contributor. Instead, the SSA will not send any checks until the full amount has been withheld for the year. For the SSA to do this, you are expected to report your projected earnings ahead of time. The SSA would round up to five months. For the first five months of the year, you won't receive benefit checks at all.
The money withheld from your benefits because you worked before FRA does not disappear forever. You can eventually get it back provided you live long enough. When you have some of your Social Security benefits withheld, the SSA will give you credit for those months and will recalculate your new higher monthly benefit once you hit FRA. Here's how this works:. Let's look at an example. During the year when you're 65 and the year when you're 66, you work enough that your benefits check is withheld for the first five months of each year.
In the year you turn 67, you don't have any benefits checks withheld at all. In fact, it will take you just over 15 years to get back the benefits you didn't receive due to working while receiving Social Security income.
There's one other caveat to consider. Remember, your Social Security benefit is based on your highest 35 years of earnings. If you work after you start getting Social Security benefits and the salary you earn is higher than your income in some earlier years, you could replace a year of low earnings with a year of high earnings. This could raise the benefit you're entitled to. Likewise, if you worked less than 35 years before claiming Social Security benefits, you could also increase your primary insurance amount by working longer.
This guide to how your work history affects Social Security benefits provides more insight into how working could increase your monthly income so you'll know if this applies to you. Social Security Disability Insurance is an earned benefit for which you become eligible if you work long enough to earn sufficient work credits prior to the time your disability stops you from working. You can learn more about SSDI benefits and eligibility in our guide, but the important thing to know here is that you can get SSDI benefits even if you have substantial assets and if your household income is high.
However, since SSDI is intended to support those who are too ill or injured to work, benefits can stop if you become able to earn income through work rather than from other sources such as investments or gifts from family. SSDI does want to encourage you to try returning to the workforce, though -- so your monthly benefits won't be affected right away if you start earning income.
Instead, you have the opportunity to continue receiving your full SSDI checks during a trial work period. If you're working while receiving SSDI benefits, you're also eligible for expedited reinstatement benefits within five years. If your condition worsens and you become unable to continue earning income from a job or self-employment, expedited reinstatement ensures you can request that your SSDI benefits restart without having to complete a full and lengthy disability application process again.
The table below helps to explain the AIME calculation for a worker born in who plans to retire in at age 66 and two months, their full retirement age FRA.
It assumes the employee has worked from through Source : Social Security Administration. The third column shows the wage index factors, as published in Column four shows annual indexed earnings the second column x the third column. Notice that the index factor becomes 1. If you plan to continue working after age 60, just project the taxable earnings in the second column and use 1.
The Social Security website has a full table. The SSA performs a similar calculation for all past years in which any contributions were paid. Then the average of all indexed earnings from the 35 highest-income years from the fourth column, above is factored into the calculation.
To do this, simply add up the highest 35 years and divide by 35, or to get monthly amounts, take the sum and divide by 35 years x 12 months to arrive at your AIME.
Any wages you earn after age 60 can increase your benefits, but they are not adjusted for future wage inflation. There are two bend points, and both are adjusted for inflation each year. The relevant bend points for each worker are those published in the year the worker first becomes eligible for benefits age The bend points are inflation-indexed but only through age PIA is effectively locked in at age These COLAs are 0.
The COLA adjustment for was 1. For , it is 5. PIA determines the monthly Social Security benefit that will be received in the first year of benefits by a worker who starts benefits at their FRA , which is 66 for individuals born between and , increases by two months each year for those born after , and reaches 67 for those born in and thereafter. But what about a worker who elects to receive benefits before reaching their FRA?
Retiring at 62, they would receive Retiring at 63 would give them There are four ways the starting benefit can be permanently increased or reduced from the PIA calculated at age All four points are related to your starting Social Security benefits. Keep in mind that when your benefits start, the COLA will increase them annually. If you start benefits at age 66, your PIA determined at age 62 automatically increases with the applicable COLAs from the years in which you turn 63 through Share using email.
Keep in mind If you did have benefits withheld before reaching full retirement age due to work income, you can recoup them afterward. Updated December 28, More on Social Security and Work Does what my spouse makes affect the earnings limit for my benefits? Does my income affect my monthly premiums for Medicare?
Family Caregiving. Leaving AARP. Got it! Please don't show me this again for 90 days.
0コメント