If you’re approaching retirement, Social Security is likely in your future. For almost 80 years, Social Security has been a valuable resource for retirees. Nearly 90 percent of all Americans age 65 and older receive Social Security benefits. That’s almost 46 million retirees and their dependents.1
How much can you expect to receive from Social Security during your retirement? That depends on a number of factors, including your age. According to the Urban Institute, the average baby boomer retiree filing for benefits in 2020 will receive a total of $500,000 in benefits over the course of his or her lifetime. The average millennial retiring in 2050 is projected to receive $1 million in retirement benefits.2
Of course, those are broad estimates. To accurately plan your retirement income, you’ll need to project your Social Security benefits. The Social Security website has a tool to help you do this. There are two primary factors used to generate your benefit amount. By better understanding these factors, you can make more informed decisions regarding your career and your Social Security filing.
How much did you earn in your career?
Your career earnings are one of the most important factors in the calculation of your Social Security benefit. As you likely know, Social Security is funded through payroll taxes throughout your career. The more you earn, the more you pay, up to a maximum. In order to qualify for Social Security, you must have a minimum of 40 quarters of work history.3
Social Security averages your earnings over your highest 35 years of income to calculate your benefit. If you have more than 35 years of work history, Social Security will drop your lowest-earning years in the average calculation. If you have fewer than 35 years of history, Social Security will count any missing years as zero earnings.3
When will you file?
Your benefit amount also depends greatly on your age at the time you file for benefits. Your full benefit is based on your average earnings. However, that amount could be adjusted depending on when you file. To get your full benefit amount, you must file at your full retirement age (FRA). Most people’s FRA falls between their 66th and 67th birthdays.4
You can file as early as age 62, but your benefit could be reduced if you do so. The earlier you file, the greater the reduction. For example, if your FRA is 67 and you file at age 62, your benefit will be reduced nearly 30 percent. If your FRA is 67 and you file at age 66, the reduction is only 6.7 percent. Keep in mind that these reductions are permanent.4
You can also wait past your FRA to file for benefits. Social Security offers an 8 percent annual increase in benefits for every year past your FRA that you wait to file. The latest you can wait to file is age 70. If your FRA is 66 and you wait until age 70 to file, your benefit will increase by a cumulative 32 percent.4
Not sure how Social Security will fit into your retirement income puzzle? Let’s talk about it. Contact us today at Peak Financial. We can help you analyze your benefits and develop a projection. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
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