How does the Social Security Administration calculate my benefits?
Freeman Owen: David, prior to the break we were discussing how these benefits are calculated. Some folks want to know in detail how the Social Security Administration comes up with these calculations to determine the type of benefits they will receive. There are tools readily available and all you have to do is use those tools
How does the Social Security Administration come up with the calculations to determine the type of benefits I will receive?
David Melton: I would encourage people to do two things:
1. Look at our publications and pamphlets. Go to our website www.Socialsecurity.gov and down toward the bottom there is a link called “Publications.” I would encourage people to look at their retirement benefit and how it is figured. We talk about how we calculate that benefit. You actually have the math computation on the fact sheet. Armed with that Social Security statement you have now because of the My Social Security Account. You can use your My Social Security Statement to do the calculations yourself if you would like.
2. Use the Retirement Estimator. For those who are just interested in getting the numbers, we have a great tool called the “retirement estimator.” It mirrors some of the information that you would obtain through the My Social Security Statement, but it is different in that it allows people to project future anticipated earnings. In preparing your Social Security statement, we take the last year of wages that you have recorded and project those out as your future anticipated wages. But perhaps that is not that individual’s plan. Maybe that worker does not anticipate working at that level to age 66 or 67. They are going to retire sooner, maybe in their late 50s. So the online retirement estimator, available at www.socialsecurity.gov/estimator allows you to project your future by answering two questions:
a. How much do I earn each year
b. At what age will those wages stop
You will get an immediate online response on how decisions we make in terms of work history will impact the amount of your Social Security Benefit.
Freeman Owen: I have to consider my parents who were born before 1938. I would hear my father say, “At 65 I can’t wait to get my Social Security. I’m glad I will have that to augment my pension.” Now there is a new full retirement age. Eligibility age is at 62, but let’s talk about full retirement age. We have seen the age go from 62 to 67.
What is the full retirement age at this time?
David Melton: Right now this is the last year of workers sharing a 12 year cohort of time, people born between 1943 - 1954 who shared age 66 as the full on reduced retirement age. So those workers born in 1954 are the individuals attaining age 62 this year.
But the 1983 legislation changed the age at which someone can receive that full reduced benefit from historical age 65 to age 67. Implemented over 39 years, it affects individuals who are born in 1939 or later. There has been a gradual increase for the last 12 years. We have been static at age 66. We will begin to see that age raise in 2 month annual increases. For example, someone born in 1955 will have to be 66 and 2 months of age to get their full check. Ultimately reaching age 67 for all workers born in 1960 and later.
Visit my website JustAskFreeman.com for more useful tips on how to get the most from your retirement planning & Social Security benefits. VA | MD | DC . Also, download my free “SAFE MONEY KIT” to get the most from your retirement dollars. Tel: 1-866-471-7233