It’s hard to know how much you should save for retirement when you don’t know how much you’ll get from Social Security. You can try planning for retirement without these benefits if saving is easy for you, but for most people, this isn’t realistic.
Finding out exactly how much your monthly Social Security checks will be may not seem realistic either to those who don’t understand how the government calculates your benefit. Fortunately, it’s much easier than you think and no math is required.
The answer is just a few clicks away
It would take the average person quite a bit of time to manually calculate their Social Security benefits using government formulas, but fortunately, that’s not necessary. You can quickly find out the amount of your checks by creating a my Social Security account.
This is a free service. You will need some basic personal information, such as your date of birth and Social Security number. You’ll also need to answer a few identity verification questions and may need to enter a confirmation code that was sent to you via email or text message.
Once done, you’ll be taken to your account page, where you can see if you’re eligible for Social Security based on your work history to date. You can also request replacement Social Security cards if needed and review your earnings history. This shows how much money you have paid in Social Security taxes each year.
But the most valuable tool in your my Social Security account is the benefit estimate tool. It allows you to see how much you will earn from the program if you sign up during a given month between the ages of 62 and 70. The longer you delay benefits, the larger your checks will be, until you reach your maximum benefit at age 70.
The calculator also allows you to see how your monthly benefit could change based on changes in your future salary. If you anticipate a pay raise, for example, you can factor it in to see how much your checks will grow.
If you’re married, you can also find out what kind of spousal benefit you might be able to get if your partner qualifies for Social Security. But you need to know what your estimated monthly benefit is at your full retirement age (FRA). FRA is between 66 and 67 years for today’s workers, depending on the year of birth. You can solve this by having your partner create their own my Social Security account.
But it can’t tell you the best time to claim
The benefit calculator is a useful tool for estimating your monthly benefit, but it can’t tell you when to sign up to claim your highest lifetime benefit. You have to decide that for yourself, and it often comes down to life expectancy. Claiming earlier means more years of checks, but each check is smaller, while delaying leads to larger checks but fewer of them.
If your goal is to claim the highest lifetime benefit, you can find out what starting age is best with some basic calculations. First, take your estimated monthly benefit and multiply it by 12 to get your estimated annual benefit. Then multiply that by the number of years you expect to claim checks. For example, a monthly benefit of $2,000 would give you $24,000 per year. And if you claimed for 20 years, you would get $480,000 in total.
Repeat this process for a few claim ages to see which one gives you the greatest overall benefit based on your estimated life expectancy. Then try to defer claiming until that age. If that’s hard on you financially, you may need to sign up sooner than you’d like.
Another thing worth noting is that all the data the benefit calculator provides is based on the way the government calculates Social Security benefits at this time. The government may modify the program somewhat in the coming years to keep it sustainable for generations to come. If this happens, you may need to repeat the above process based on the new benefit estimates.
Once you know how much you can expect from Social Security in retirement, you can start calculating how much you need to save on your own. Don’t forget to review this information annually to make sure you’re on the right track and be ready to adjust your Social Security claim strategy as needed if your retirement plans change.