Figuring out your Social Security payment is a fairly simple process. By following the advice here, you can make accurate projections about your retirement income.
There is little doubt that Social Security is one of the most important government programs for older Americans. Roughly 60 million Americans received Social Security benefits in 2016 - and 80-percent of those people are retirement-aged.
Participating in this program requires more than paying taxes and simply waiting for a check when you retire, however. There are some important variables you need to consider that have an impact on how large your benefits will be.
Let's take a minute to review how to make that calculation, so you're well-prepared to maximize the value of your benefits.
The Social Security Benefits Formula
While you might believe the formula used to derive Social Security payments is impossibly arcane, the truth is that it's fairly straightforward. Social Security payments are based on your earnings over a lifetime. These earnings are adjusted (or indexed) to account for changes to average wages since the year you earned the income. Then your average adjusted earnings - over the 35 years in which you earned the most - are divided by 12 to produce a basic benefit number.
Reasonably easy so far, right? There are a few more things to consider, however. First, if you've worked fewer than 35 years, your benefit will be lower, as those years will count for zero in your benefit calculation. Also, your age will influence your final Social Security benefit number.
Additionally, you may choose to receive your Social Security payments before your full retirement age of 67. There is a cost for doing so, however: Every year below 67 you go (all the way to the minimum year of 62) will result in lower Social Security payments.
If you're looking for an easier way to estimate your total payment, one of the simplest options involves using the Social Security Administration's online Quick Calculator. By punching in a few quick numbers, you can arrive at the answer quickly and easily.
The Takeaway
Figuring out your Social Security payment is a fairly simple process. By following the advice outlined above, you can make accurate projections about your retirement income.
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