It’s hard to know how much you should save for retirement if you don’t know how much Social Security will give you. You can try to plan for retirement without these benefits if you can easily save time, but for most people this is not realistic.
Figuring out how big your monthly Social Security checks will be may also seem unrealistic to those who don’t understand how the government calculates your benefit. Fortunately, it’s a lot easier than you might think, and it doesn’t require any math.
The answer is just a few clicks away
It would be quite time-consuming for the average person to manually estimate their Social Security benefits using government formulas, but thankfully there’s no need to. You can quickly find out how big your checks will be by creating a My Social Security account.
This is a free service. You will need some basic personal information, such as your date of birth and social security number. You will also need to answer some questions about identity verification and you may need to enter a confirmation code sent to you via email or text message.
Once that’s done, you’ll be taken to your account page where you can see if you’re eligible for Social Security based on your work history to date. You can also order replacement Social Security cards if needed and view your earnings history. This shows how much money you have paid in Social Security taxes each year.
But the most valuable tool in your my Social Security account is the benefit estimation tool. This allows you to see how much you will earn with the program if you sign up between your 62nd and 70th birthdays in any given month. The longer you delay distributions, the bigger your checks get, until you reach your maximum distribution at 70.
The calculator also shows you how your monthly benefit may change based on changes in your future salary. For example, if you expect a pay rise, you can factor this in to see how much your checks will grow.
If you are married, you can also find out what kind of partner benefit you could receive if your partner qualifies for social security. But you do need to know their estimated monthly benefit at full retirement age (FRA). FRA ranges from 66 to 67 for today’s employees, depending on the year of birth. You can find out by having your partner create their own Social Security account.
But it can’t tell you the best time to claim
The Benefits Calculator is a useful tool for estimating your monthly benefit, but it can’t tell you when to sign up to claim your biggest lifetime benefit. That is something you have to decide for yourself, and often it comes down to life expectancy. Claiming earlier means more years of checks, but each check is smaller, while delay leads to bigger checks, but fewer.
If your goal is to claim the largest lifetime benefit, you can figure out what starting age is best with some basic math. First, take your estimated monthly benefit and multiply it by 12 to get your estimated annual benefit. Then multiply that by the number of years you expect to claim checks. For example, a monthly benefit of $2,000 would net you $24,000 per year. And if you claimed 20 years, you would get a total of $480,000.
Repeat this process for a few claim ages to see which one gives you the greatest benefit overall based on your estimated life expectancy. Then try to postpone the claim until that age. If that’s hard for you financially, you may have to sign up sooner than you’d like.
Another thing worth noting is that all of the data that the benefit calculator provides is based on how the government currently calculates Social Security benefits. The government may change the program in some way in the coming years to keep it sustainable for future generations. If this happens, you may need to repeat the above process based on the new benefit estimates.
Once you know how much to expect from Social Security when you retire, you can begin to calculate how much you need to save on your own. Remember to review this information annually to make sure you’re on track and ready to adjust your Social Security claims strategy as your retirement plans change.