The senior citizens of the United States realize the importance of Social Security like no other. One-third of their earnings come from Social Security benefits, and it has a key role to play in their financial well-being post-retirement. If you are a senior citizen of the USA, you must know exactly what kind of benefits you can derive from the program. Here’s how you can calculate the expected benefits you would get from Social Security. Go through the following steps carefully.
The two ways through which you become eligible for Social Security Retirement Benefits are either through the work record that you have or the work record that your spouse has. When it is about the work record that you have, you need 40 credits under your belt to be eligible for Social Security Retirement Benefits. As of the year 2019, you need to earn around $1320 for a single credit. If things go according to your plan, there are four credits you can earn in a year. Hence, you will be eligible for a retirement benefit if you have earned a minimum amount of $5280 for 10 years. If you have no idea of whether you have earned the eligibility status, you can easily find that out from the Social Security statement of earnings. You can access the statement by opening an account on the website of the Social Security Administration (SSA). In case you don’t qualify based on your work record, check out if you have the eligibility to get a spousal benefit.
Next, you need to calculate the Social Security benefit that you might receive. First, you need to enlist how much you have earned in a year throughout your career, up to the taxable minimum for a single year. If you don’t have this piece of information with you, go through the Social Security statement that’s available for each year. For instance, if the maximum sum that you earned in the year 2015 after shelling out the payroll tax was around $118,500, the exact figure that you have raked in 2015 would have to be either the taxable minimum or your actual earnings in that year. You have to choose whichever is lower. After you are done listing all the yearly income figures, the figures need to be adjusted for inflation. The SSA or Social Security Administration furnishes an index factors worksheet that you can avail of for your annual income. Taking 2015 under consideration, the index factor of that year was recorded at 1.97. Hence, that would your annual earnings at $50,000 in 2015. To adjust the figure for inflation, multiply that by 1.97 and you would reach almost $98,500. You have to repeat this entire process for every annual income during the period you worked.
Once you are done with adjusting your annual income for inflation, you need to bring down the complete list to the 35 highest-earning years. The benefit that you receive from Social Security is based on the sum that you raked in during those 35 years in which you have raked in the maximum annual income. However, these figures too need to be adjusted for inflation. In case you have worked for less than 35 years, you have to put in zeroes to fill the blanks. If you have been employed for 32 years, you must enlist the inflation-indexed earnings of all those years and then add three zero entries.
The fourth step would require you to calculate the AIME or Average Indexed Monthly Earnings, based on which, your Social Security retirement benefit can be calculated. Add all 35 of your highest income figures that have been adjusted for inflation and then divide what you get by 35 to arrive at the annual average. To get your average indexed monthly earnings, divide again and this time, by 12.
If you are aged 50 and above or are close to retirement, there isn’t much that you need to worry about. In case you are younger, the calculation for the Social Security benefits will be a bit different. Hence, do your calculation wisely to avoid any future complications. If you are not sure how to do the math, you can call an SSA rep or talk to a social security advisor.