For the average household, social security will make up 40% of their income, and rather or not that percentage will be higher or lower for you, it’s important to know
so you can plan around saving the difference.
To calculate your benefit, we start by figuring your average indexed monthly earning amount.
Begin by writing down your annual income for every year you worked since the day you joined the workforce.
If you don’t know how much you earned 30 years ago – don’t worry – you can sign up for an account with the social security administration to receive a copy.
The next step is to compare each year’s income with that year’s social security maximum earning amount, and write down the lesser of the two.
Now multiple each years earning by the index factor to adjust them for inflation.
Finally, take the highest 35 years, and divided them by 420, which is 35 times 12 – congratulations, you’ve calculated your average indexed monthly earning amount – but we’re not finished.
The social security administration uses a graduating bracket with decreasing percentages to figure how much of your monthly average you’ll take as a benefit.
Start by multiplying the first $926 by 90%, multiply every between $926 and $5,583 by 32%, and write that number down, multiply everything over $5,583 by 15%, and write the number down.
Add those three numbers together and – VOILA, you now know your social security benefit at your full retirement age.
Full retirement age, is the age at which you will receive 100% of your benefits, but that age changes dependent upon when you were born.
To learn more about full retirement age, and how much your benefit will be reduced for collecting early or later, head by to our channel and look for the title.
If you’re looking for a rough social security estimate, head over to the social security website and look for their benefit calculator.
If you’d like to learn more about social security, and retirement as a whole, click on the subscribe button.