Social Security Questions: How Much Can I Expect To Receive?Submitted by Reby Advisors | Certified Financial Planners | Danbury, CT on November 27th, 2014
Social Security retirement benefits may be collected as early as age 62. The latest age is 70. Along with how much and for how long you’ve paid into the system, when you elect to claim benefits determines how much you can expect to receive.
It is generally recommended to collect Social Security benefits at the “full retirement age” of 66—or even holding out until you’re 70—because the longer you can wait, the bigger your monthly payments will be. It’s important to note that “full retirement age” does not mean you have to retire at that time to collect Social Security benefits.
We’ll cover “when to claim Social Security benefits” in greater detail in our next article.
Consider, though, that full retirement age will vary depending on when you were born. In 1983, the full retirement age was raised to 67 for people born in 1960 and later. The full retirement age for people born in 1943 to 1957 is 66.
Factors Affecting Your Payouts
But how much can you expect to collect from your Social Security? Just as full retirement age varies with each person, so does the amount of payments each person will get. The amount you receive will depend on two factors:
*Your retirement age (as previously explained)
*Your earnings over the highest-earning 35 years of your career
Another key factor to determining the amount of payments you can receive is the year you were born. People born from 1943 to 1954 may get a 25 percent reduction in payments when they decide to retire before 62. The 25 percent reduction applies not just to the payment collected from the age of 62 to 67, but also for the rest of the recipient’s life.
The Social Security Administration has a chart, which you can use to base your possible reduction at your chosen retirement age. Note that the calculations, however, are based off of a $1,000 monthly benefit.
Calculating Your Benefits
The usual formula for determining Social Security benefits will consider certain elements:
*It will include your highest 35 years of earnings;
*Your earnings will be indexed for inflation, and averaged;
*It will then be applied to your AIME (“averaged indexed monthly earnings”), which will conclude your PIA (primary insurance amount), which is what you will get at full retirement age; and
* It will consider the COLAs (cost-of-living-adjustments) which may increase your benefit each year.
An individual born in 1946 with maximum Social Security earnings every year since 22, an AIME of $7,260, and retiring at age 66 may receive PIA in the amount of $2,230.30 per month. If you want that amount to go up further, note that for every year you delay collection, after full retirement age and before 70, your benefit increases by 8 percent.
Applying Before the Full Retirement Age
So what happens when you apply for benefits or payouts before your full retirement age? Those born between 1943 and 1954 could expect to receive only a percentage of the benefits they would receive at the full retirement age.
For example, your supposed PIA is $2,230 and you apply for Social Security benefits at 62. You may receive 75 percent of the monthly payout you would have received had you applied for benefits at the full retirement age, which comes to a total of $1,672 (as opposed to the full $2,230).
If you apply at 63, you will receive 80 percent, which amounts to $1,784. Applying for Social Security at 65 gives you 93.3 percent of your benefit, which comes to a total of $2,080.
Applying After the Full Retirement Age
Application for Social Security benefits after your full retirement age will lead to earned delayed credits. Application at the age of 67 results in getting monthly payments of 108 percent of what you would have collected at age 66. When you apply at 68, you receive 116 percent, which amounts to $2,408. As stated previously, your “benefit increases at 8 percent” each year you delay application, plus the annual cost of living adjustments (CLA), up until 70.
What Your Spouse Could Receive
Your Social Security benefits also extend to your better half. But rules will apply concerning the amount your spouse receives. The prevailing policy is that your spouse gets the greater of his/her own benefits, or half of yours.
Your spouse will still be entitled to your Social Security even if you were divorced (except your marriage should have lasted 10 or more years before the divorce and that you only receive the benefit if you have not remarried).
Estimating Your Social Security Benefits
To get an appropriate estimate of your Social Security benefits, head to the Social Security website at www.socialsecurity.gov and find the “Estimate Your Retirement Benefits” section. Your annual Social Security Statement may also provide you with sufficient information regarding the amount of your benefit.
Keep in mind, however, that your Social Security strategy should not only be about maximizing payout. It’s a “peace of mind” benefit that should be assessed strategically within the context of your entire financial picture and lifestyle goals. Speak with your financial advisor before making a decision.
 Horsesmouth, LLC