That depends. In 13 states , your Social Security benefits will be taxed as income, either in whole or in part; the remaining states do not tax Social Security income.
Our advice? Aim high and save as much as you can. Baby steps. What is an Index Fund? How Does the Stock Market Work? What are Bonds? Investing Advice What is a Fiduciary? What is a CFP? I'm an Advisor Find an Advisor. Your Details Done. This impacts the amount of benefits that you will receive. Do this later Dismiss. Annual Income.
We'll use this to calculate your social security benefits. Retirement Age. Enter your retirement age. Marital Status. Enter your marital status Single Married. Spouse Details. Enter your spouse year of birth Do this later Dismiss. Spouse Income. Enter your spouse total pre-tax annual income. Enter your partner retirement age. Annual General Inflation. The annual payment you receive from Social Security is based on your income, birth year, and the age at which you elect to begin receiving benefits.
Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. If you are a typical U. If you also figure in the time value of money on these contributions, your total contribution to the system could be twice as much.
Two facts are known—Social Security benefits are not guaranteed, and some changes will be necessary to keep the system solvent in the future as millions of baby boomers retire and begin to receive their Social Security benefits. A good starting point is to figure out the dollar amount of the retirement benefits to which all of your years of Social Security contributions entitle you under current law. There are four ways to do this:. As of October 14, , they are open but the website states that most Social Security services do not require a visit to an office.
People may also transact their business online, by phone, or through the mail. One important idea behind Social Security is that workers can keep earning benefits for every dollar they pay into the retirement system for as long as they keep working. This idea is embedded in the first step, the calculation of your average indexed monthly earnings AIME.
It begins with the column on your Social Security statement that shows your taxed Social Security earnings year by year. The table that matters for your benefit calculation is the one published the year you turn Any wages you earn after age 60 can increase your benefits, but they are assigned a NAWI table factor of 1. 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 The analysis can tell you when the total benefits you would receive by waiting will begin to exceed the total that you would receive by taking benefits earlier.
The Social Security website will tell you that regardless of when you start claiming, your lifetime benefits will be similar if you live as long as the average retiree. The problem is that not everyone will have an average life expectancy, hence all the different claiming strategies. As with claiming benefits on your own record, your spousal benefit will be reduced if you take it before reaching your FRA.
The highest spousal benefit that you can receive is half of the benefit that your spouse is entitled to at their FRA. While spouses get a lower benefit if they claim before reaching their own FRA, they will not get a larger spousal benefit by waiting to claim after their FRA—say, at age However, a nonworking or lower-earning spouse may get a larger spousal benefit if the working spouse has some late-career, high-earning years that boost their benefits.
If the higher-earning spouse dies first, then the surviving, lower-earning spouse will receive a larger Social Security check for life. However, spouses born before Jan. It allows them to claim spousal benefits while delaying their own benefits up to age Social Security benefits can be taxable if your combined income is high enough.
Your Social Security benefits may be partially taxable if your combined income exceeds certain thresholds. The SSA defines combined income using this formula:. How do these tax considerations affect when you should apply for Social Security benefits? Then you may want to claim early instead of waiting until age However, it's important to remember that investments have risks, and you may lose a portion or all of your invested money. However, if your returns are lower, if you receive reduced Social Security benefits because you continue working past age 62, if you have to pay taxes on your Social Security income, or if you have a spouse who would benefit from claiming Social Security benefits based on your record, then another Caplinger analysis suggests that all bets are off.
Claiming Social Security benefits could make you ineligible to put more money into a health savings account HSA. Your health insurance coverage can also play a role in deciding when to claim Social Security benefits. Do you have a health savings account HSA to which you would like to keep contributing? The SSA also cautions that even if you delay receiving Social Security benefits until after age 65, you might still need to apply for Medicare benefits within three months of turning 65 to avoid paying higher premiums for life for Medicare Part B and Part D.
As of Oct. If you can live without the income until age 70, then you will ensure the maximum payment for yourself and lock in the maximum spousal benefit. Just be sure that you have enough other income to keep you going and that your health is good enough that you are likely to benefit from the wait. Social Security Administrator. Social Security Administration.
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