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Calculate Social Security Retirement Benefits

How Inflation Impacts Your Pia

How to Calculate Your Social Security Benefits

Your PIA is calculated at age 62. If you wait beyond age 62, cost-of-living adjustments will be applied to your PIA for each year afterward.

If you have already had most of your 35 years of earnings, and you are near age 62 today, the age 70 benefit amount you see on your Social Security statement will likely be higher due to these cost-of-living adjustments. Many people do not account for this when doing their own calculations, which can lead them to think that taking Social Security early is a better deal, when waiting is often the better deal.

In the table below, our hypothetical worker, born in 1954, is eligible for full retirement at age 66. The column on the right shows the effect of inflation for waiting beyond age 62 to take their benefits.

Effect of Age on Claiming Benefits

Other Sources Of Retirement Income

Home Equity and Real Estate

For some people in certain scenarios, preexisting mortgages and ownership of real estate can be liquidated for disposable income during retirement through a reverse mortgage. A reverse mortgage is just as it is aptly named â a reversing of a mortgage where at the end , ownership of the house is transferred to whoever bought the reverse mortgage. In other words, retirees are paid to live in their homes until a fixed point in the future, where ownership of the home is finally transferred.


A common way to receive income in retirement is through the use of an annuity, which is a fixed sum of periodic cash flows typically distributed for the rest of an annuitant’s life. There are two types of annuities: immediate and deferred. Immediate annuities are upfront premiums paid which release payments from the principal starting as early as the next month. Deferred annuities are annuities with two phases. The first phase is the accumulation or deferral phase, during which a person contributes money to the account . The second phase is the distribution, or annuitization phase, during which a person will receive periodic payments until death. For more information, it may be worth checking out our Annuity Calculator or Annuity Payout Calculator to determine whether annuities could be a viable option for your retirement.

Passive Income


When Should I Start Collecting Social Security

Ultimately, the decision of when to begin collecting Social Security is one you have to make. It depends on your age, your health status, how much you spend and how much you have saved. Its generally best to start collecting as late as you can, because you get a larger monthly payment, which is adjusted for inflation each year.

Consider a retiree who was born in 1950 and averaged $50,000 a year in salary. If she has $3,000 a month in expenses, her Social Security check would cover 48 percent of her expenses if she started Social Security at age 62. If she waited till age 70, her check would cover 85 percent of her expenses. Every year she delays retirement, her Social Security payout which is adjusted annually for inflation rises by about $1,649.

Traditionally, the retirement system in the U.S. has been a three-legged stool: Social Security, savings and pensions. Social Security was never intended to be the sole source of income for retirement. Increasingly, however, employers have been moving away from their employer-sponsored pension plans in favor of tax-deferred retirement savings accounts, such as 401 plans.

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When Will I Know What My Social Security Benefits Are For 2023

The Bureau of Labor Statistics is scheduled to announce inflation data for September on Oct. 13, and the Social Security Administration typically announces the cost-of-living adjustment issues soon after.Beneficiaries should then receive letters detailing their specific benefit rate in December. If you miss this letter, you can still verify your increase online via the My Social Security website.

The COLA goes into effect with December benefits, which appear in checks received in January 2023.

Social Security payments are made on Wednesdays, following a rollout schedule based on the beneficiary’s birth date: If you were born from the 1st through the 10th of the month, your benefits are paid on the second Wednesday of the month and any increase will appear in your Jan. 11 check.

Any increase in Social Security payments will appear in January 2023 checks.

If your birthday falls between the 11th and 20th of the month, your checks are paid on the third Wednesday, and you’ll see your first COLA increase on your Jan. 18 check.

Those born between the 21st and the end of the month receive benefits on the fourth Wednesday, which, in 2023, is Jan. 25.

What Does Aarps Social Security Calculator Do

Social Security Calculator Spreadsheet Inside Example Of Retirement ...

The calculator provides an estimate of your Social Security benefits, based on your earnings history and age. Our tool also helps you see what percentage of daily expenses your payments can cover, and how you can increase your benefits by waiting to collect. It can also tell you how your retirement earnings will be affected if you keep working after you claim your Social Security benefit.

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Obtaining A Benefits Estimate

You can estimate your retirement benefit online based on your actual earnings record using the Retirement Estimator calculator on the Social Security website, ssa.gov. You can create different scenarios based on current law that will illustrate how different earnings amounts and retirement ages will affect the benefit you receive. Other benefit calculators are also available that can help you estimate disability and survivor benefits. You can also sign up to view your Social Security Statement that contains a detailed record of your earnings, as well as estimates of retirement, survivor, and disability benefits. If youre not registered for an online account and are not yet receiving benefits, youll receive a statement in the mail every year, starting at age 60.

Can Your Pia Change After You Reach Age 62

There are two things that affect your PIA after you reach age 62:

  • Higher earnings: Earnings in years between age 62 and 70 that are higher than one of the 35 highest earnings years previously used in the formula will change your AIME, which is used in the PIA formula.
  • Inflation: Your PIA will be adjusted by the same cost-of-living adjustments applied to people who are already receiving Social Security benefits. You can see historical cost-of-living adjustment rates on the Social Security Administration’s website.
  • You may get the wrong answer when running your own calculations on when to begin Social Security if you simply take the numbers off your statement and do not properly apply inflation adjustments.

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    Understanding How Your Benefit Amount Is Calculated

    Your Social Security benefits will be based on your average lifetime earnings, expressed as your primary insurance amount . Calculating your PIA is complicated because some factors used in the benefit formula change annually. Instead of calculating it yourself, its easiest to obtain a benefit estimate directly from the SSA .

    However, knowing how your PIA is calculated may be useful in benefit planning. Currently, the two PIA calculation methods most frequently used are:

  • The simplified old-start benefit methodThis method is used if age 62, disability, or death occurred prior to 1979. It averages actual earnings and uses a table to calculate the PIA.
  • The wage indexing methodThis method has been used since 1979. Indexing earnings is a way of adjusting them to reflect changes in wage levels throughout years of employment. This ensures that your benefits reflect increases in the standard of living. In general, the wage indexing method calculates your PIA by indexing your lifetime earnings up to and including the year you turn 59. Then, your highest earnings for a specific number of years are averaged and a benefit formula is applied to this figure to calculate the PIA.
  • Two other benefit computation methods are less frequently used:

  • Special minimum benefit tables are used sometimes to compute benefits payable to some individuals who have long periods of low earnings and who have at least 11 years of coverage.
  • What Is Estimating Your Social Security Benefits

    How To Calculate Social Security Benefits [3 Easy Steps]

    Estimating your Social Security benefits is particularly important when you are planning for retirement, although you may be interested in estimating survivor benefits or disability benefits as well. When planning for retirement, you should neither overlook nor overstate the value of your Social Security benefits. Predicting the future of Social Security is difficult, because to keep the system solvent, some changes must be made to it. The younger and wealthier you are, the more likely that these changes will affect you. But even if you retire in the next few years, remember that Social Security was never meant to be the sole source of income for retirees. As President Dwight D. Eisenhower said: The system is not intended as a substitute for private savings, pension plans, and insurance protection. It is, rather, intended as the foundation upon which these other forms of protection can be soundly built. Estimating your Social Security benefits now will not only help you plan an effective long-term retirement strategy, but it can also help you understand what benefits might protect your family if you were to die or become disabled.

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    Make Necessary Adjustments To Pia

    Adjustments to your PIA are done to account for cost of living adjustments and retirement age. If you wait to receive benefits until your full retirement age , then you will receive 100% of your benefits. However, if you choose to start your benefits early, then you will see a reduction in your benefits. In fact, waiting past full retirement age can allow you to see an increase in your PIA. Starting your benefits just a small number of months early can permanently reduce the benefits you will receive. So, it is always wise to wait until full retirement age if possible to start your benefits.

    Social Security For The Disabled

    People who are disabled, are dependents of retired or disabled workers, or are surviving spouses/children may also receive benefits. Note that this is supplementary information and that the Social Security Calculator only provides calculations for retirement benefits.

    The SSA’s definition of disability refers to total disability, so partial or short-term disabilities are not qualified for benefits. Under the SSA’s rules, a person is disabled only if they meet all of the following conditions:

    • They cannot do work they did before
    • The SSA decides that they cannot adjust to other work because of their medical condition
    • The disability has lasted or is expected to last at least one year or to result in death

    Benefits usually continue until beneficiaries are able to work again. Disability beneficiaries that reach full retirement age will have their benefits converted into retirement benefits, with the amount remaining the same. It is against the law to receive both disability and retirement benefits at the same time.

    Social Security Disability Insurance

    Supplemental Security Income

    In some situations, it is possible to receive both SSDI and SSI. This usually happens when a qualified application for SSDI is granted low enough an SSDI benefit to make the applicant also eligible for SSI.

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    How To Calculate Social Security Benefits

    Retirement can be an exciting time, but it can also be scary for some. You might be wondering whether you have put enough money away for retirement. Everyone wants to make sure that they have enough income during retirement to continue to pay for their expenses. Since most retirees will rely at least partially on Social Security benefits, it is imperative that they know how much money they will be receiving from the Social Security Administration upon retirement. Thankfully, there are a few ways that you can estimate the amount of your retirement benefits. If you are approaching retirement age, then you can go ahead and estimate your benefits so that you can plan and budget accordingly when you are ready to leave your full time employment.

  • What is the average monthly Social Security payment in the US?
  • Explore How The Age You Start Collecting Social Security Affects Your Retirement Benefits

    The Best Age to Begin Collecting Social Security Retirement Benefits ...

    The calculator bases your benefit estimate on current formulas from the Social Security Administration. Your answers are anonymous. Because we do not access or use your Social Security earnings record, these are rough estimates.

    Your estimated benefits:

    Select claiming ages on the graph to see how your estimated benefit changes.

    Claiming at age Age 67 is your full benefit claiming age.

    Compared to claiming at your full benefit claiming age.

    Social Security retirement benefits are not designed to be your sole source of retirement income, but waiting even one month will increase your benefits.

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    List Each Year’s Earnings

    Your earnings history is shown on your Social Security statement, which you can now obtain online.

    In the table below, sample earnings for a hypothetical worker born in 1953 are shown in Column C. Only earnings below a specified annual limit are included. This annual limit of included wages is called the “Contribution and Benefit Base” and is shown as Max Earnings in Column H in the table.

    Factors That Affect How Much You’ll Get In Retirement

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    Most retirees rely on Social Security. One in four gets 90% of their retirement income from the program. About half rely on it for 50% of their income.

    Although Social Security is only one part of a secure retirement plan, it’s helpful to get a rough idea of how much you can expect. If you’re eligible for Social Security, your monthly benefit is based on two factors:

    • How much money you earned during your working career
    • The age you choose to start getting payments

    Let’s look at how each of these affects your future Social Security income.

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    Inflation Creates More Uncertainty

    Not surprisingly, perhaps, half of retirees who feel less confident about their ability to live comfortably in retirement blamed inflation for triggering more anxiety, according to the 2022 Retirement Confidence Survey conducted by the Employee Benefit Research Institute and Greenwald Research.

    Inflation hasn’t been a worry for decades but now those who are retired or planning for retirement need to consider what higher prices will mean to their 401s or limited savings.

    One key point: If you’re at least 62 or older in 2023, you’d benefit automatically from next year’s COLA increase even if you have not yet filed to receive Social Security benefits.

    Inflation adjustments are baked into future payments each year until you claim benefits as long as you’re 62 or older in 2023.

    The Social Security Administration notes: Youre eligible for cost-of-living benefit increases starting with the year you become age 62. This is true even if you dont get benefits until your full retirement age or even age 70.

    Ultimately, getting inflation and some costs under control again would help a great deal.

    Prices at the pump in Michigan, after soaring to a record $5.22 a gallon in June, are finally falling back near to levels last seen in April, according to AAA Michigan.

    Michigan drivers are now paying an average of $3.95 a gallon, according to AAA’s data released on Aug. 15. That’s down 77 cents a gallon from a month ago but up 69 cents a gallon from this time last year.

    How Much To Save For Retirement

    How Social Security Retirement Benefits Are Calculated [3 Easy Steps]

    Naturally, the next question becomes: how much should a person save for retirement? Simply put, it’s an extremely loaded question with very few definite answers. Similar to the answer to the question of whether to retire or not, it will depend on each person, and factors such as how much income will be needed, entitlement for Social Security retirement benefits, health and life expectancy, personal preferences regarding inheritances, and many other things.

    Below are some general guidelines.

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    Social Security For Retirement

    The biggest determinant of retirement benefit amount is lifetime earnings since the benefit is based largely on the average of a person’s 35 highest-earning years. Because the SS tax is regressive, in retirement, lower-income earners will have a higher portion of their SS retirement benefits paid out in relation to their lifetime earnings than higher-income earners. Another important determinant of benefit amount is the age at which a person applies for retirement benefits.

    SS is designed to replace about 40% of the average American worker’s pre-retirement income. This value is dependent on each individual’s work history higher-income earners will receive larger SS checks than lower-income earners, but the check will be a smaller percentage of their pre-retirement income. SS is not intended to be a sole source of retirement income, and as such, it is advisable to have other forms of income in retirement. This can take the form of anything from rental property income to annuities, mutual funds, or even tax-shielded retirement plans such as a 401 and/or IRAs.

    Full Retirement Age

    Retirement Benefits While Working

    When to Apply for Social Security Retirement Benefits

    • The immediate need for cash
    • Life expectancy
    • Relative age, income, and health of spouse

    Social Security Credits

    Receiving Retirement Benefits Outside of the U.S.

    Can I Use The Calculator To Figure Out Social Security Disability Insurance And Supplemental Security Income

    No. SSDI is aimed at people who cant work because they have a medical condition expected to last a year or more or result in death. Your SSDI benefits last only as long as you suffer from a significant medical impairment while not earning significant other income.

    SSI is a separate program for people with little or no income or assets who are 65 or older, as well as for those of any age, including children, who are blind or who have disabilities. The maximum monthly SSI payment for 2022 is $841 for a single person and $1,261 for a couple. But some states add to that payment, and you may receive less than the maximum if you or your family has other income. Get more information about SSDI and SSI from the Social Security Administration.

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