Millions of seniors rely on the monthly income of social security when retired. Whether you are about to earn benefits or are still at the center of your work, it is worth knowing a few basic facts about the program for you to do well. Here are some important numbers that you should remember.
Your social security benefits are calculated on the basis of your 35 highest earnings years. These wages are indexed for inflation, summed up and divided by 420 (35 years x 12 months per year) to get your average monthly revenue. If you do not have a full 35 years of revenue, you will be billed $ 0 for each year you miss an income. Your average monthly income will then be included in a formula that determines what monthly benefit you can receive at full retirement age (FRA).
Remember, the SSA only takes into account wages up to the annual salary cap, which changes from year to year, when you post your earnings to calculate your benefit. For example, this year it's $ 132,900, so if you earn more, your over-salary will not be included in the calculation of benefits.
Eligible recipients receive an eight-year Social Security window that begins at the age of 62, and not surprisingly, 62 is the most popular age to claim benefits. However, the problem with claiming benefits as soon as possible is that you receive a rebate from the FRA for each month you claim social security. This reduction is 6.67% per year if you submit up to 36 months before the FRA, plus another 5% per year.
That may sound confusing when you look at a FRA of 67 and you reach 62, you have a 30% reduction in benefits (20% for the first three years you submit earlier, and another 10% for the remaining two years). In addition, this reduction will remain permanent unless you can withdraw your claim within one year of submission and repay any social security contributions you have received from Social Security until then.
Seniors who were born between 1943 and 1954 have a FRA of 66, that is, at what age are they entitled to the full monthly benefit to which they have merit. If you were born after 1954 but before 1960, your FRA is as follows:
- 1955: 66 and two months
- 1956: 66 and four months
- 1957: 66 and six months
- 1958: 66 and eight months
- 1959: 66 and 10 months
Workers born in 1960 or later have a FRA of 67. Again, the age from which you receive your full monthly benefit.
The age of 70 is generally considered to be the last age for the filing of social security benefits, although technically there is no obligation to apply for benefits at that time. However, the age of 70 is also the case when late retirement credits cease to be due for deferment of benefits, which means that there is no financial incentive not to use benefits at that time.
How Delayed Retirement Benefits Work: For Each Year When you leave behind the benefits of your FRA, they increase by 8%. So if you expect a monthly allowance of $ 1,500 for a FRA of 67, but instead claim a social security of $ 70, you'll increase each monthly payment to $ 1,860. Best of all, this boost stays in effect for the rest of your life.
If you learn more about social security, you can win a lot. So, if you were relatively in the dark until now, you should definitely read how the program works. The more information you arm, the greater your chances of getting in the right time and maximizing the benefits you are entitled to.