Social Security Payment Calculator: You’re probably a few years behind on your retirement savings if you’re like the majority of Americans. If that’s the case, you’re also most likely calculating your potential Social Security benefit right now. The amount you would receive with an annual salary of $75,000 is a realistic base case.
To qualify for Social Security benefits, you need to know these key points:
- If you were born before 1955, your retirement age is 66.
- If you were born in 1960 or later, your retirement age is 67.
- You can start benefits as early as age 62, but this will reduce your monthly payment.
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It is not limited to age. To be eligible for the benefit, you also need to accrue at least 40 labour credits. Credits are determined by your wage and the length of time you have worked and contributed to Social Security. You receive roughly four credits annually if your salary is $75,000.
Your benefits are calculated using a complex formula. Here is a summary of the fundamentals.
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Social Security Payment Calculator: How to calculate your pension
Your average wage, which takes inflation into account, is calculated by the Social Security Administration (SSA) using your work records from the last 35 years. The SSA takes the average of all the years you worked over 35 years, leaving out the years when you made less money. The average of all the money you made during that time is still $35, even if you worked less.
If you make $75,000 a year, you make $6,250 a month. The Social Security Administration provides 90% of the first $1,115 of your monthly indexed wage as a pension. In other words, you will get $1,003.50 a month.
The SSA gives you 32% of every dollar after that $1,115, up to a maximum monthly payment of $6,721 total. In the above example, you deduct the first amount from your average monthly pay, leaving you with $5,135 after that. Based on the previously mentioned methodology, you would be entitled to an additional $1,643.20 every month.
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If you wait until you reach full retirement age, the sum of the two sums will be $2,646.70 per month, or $31,760.40 annually.
Is it possible to get more Social Security benefits?
Social Security benefits can vary based on when you start receiving them:
- If you retire at age 62, your benefit will be reduced by 30%.
- If you wait until after age 67, you’ll get an extra 8% for each year you delay, up to age 70.
For someone who earned an average of $75,000 annually before retiring, Social Security alone might not be enough to maintain your lifestyle. To ensure financial stability, it’s important to have a solid savings and investment plan for a comfortable retirement.
