Elena Samofalova Retirement Income Specialist
If You’re Losing Sleep About Any Retirement Matter
I invite you to schedule a Free 30-minute Discovery Session with me.
It will calm your nerves and ease any financial worries and stress you may be feeling.
Click here to schedule
Social Security is a government program that provides financial assistance to people who are retired or disabled, as well as to their dependents and survivors.
It is funded through payroll taxes that are deducted from workers’ earnings and matched by their employers.
The program also provides benefits to people who have reached a certain age and have paid into the Social Security system for a certain number of years.
Eligibility for Social Security benefits is based on your work history and the number of credits you’ve earned throughout your career.
Most people need 40 credits (equivalent to about 10 years of work) to be eligible.
You can begin receiving Social Security retirement benefits as early as age 62, but the amount you receive increases if you wait until full retirement age (typically between 66 and 67) or even later.
Your benefit amount is calculated based on your earnings history and the age at which you choose to start receiving benefits.
The decision of when to start benefits is a critical one and can significantly affect the amount you receive in the long run.
Don’t Leave Money On The Table
We can help you avoid common mistakes and maximize your Social Security Benefits
EXPLORE OUR SERVICES
How are Social Security Benefits Calculated
Calculating your retirement benefits appears, at first glance, to be quite involved. Yet, it is actually based on only two factors: your earnings history and the age at which you decide to begin benefits.
Social Security benefits are calculated using a formula that takes into account your earnings history and the age at which you choose to start receiving benefits. Here’s a simplified overview of how Social Security benefits are calculated:
- Earnings Record: Social Security benefits are based on your lifetime earnings history. The Social Security Administration (SSA) tracks your income over your working years, up to a maximum taxable limit (which can change annually).
- Average Indexed Monthly Earnings (AIME): The SSA adjusts your historical earnings for inflation and calculates your Average Indexed Monthly Earnings (AIME). The AIME represents your average earnings over the 35 highest-earning years of your career.
- Primary Insurance Amount (PIA): The AIME is then used to determine your Primary Insurance Amount (PIA). The PIA is the amount you would receive each month if you claimed benefits at your Full Retirement Age (FRA), which varies depending on your birth year.
- FRA Adjustment: Your monthly benefits are reduced if you claim benefits before your FRA (as early as age 62). Conversely, if you delay benefits beyond your FRA, you’ll receive increased benefits up until age 70.
- Cost-of-Living Adjustments (COLAs): Social Security benefits are subject to annual Cost-of-Living Adjustments (COLAs) to account for inflation. COLAs help maintain the purchasing power of your benefits over time.
- Maximum Family Benefit: Social Security also considers the Maximum Family Benefit, which limits the total benefits payable to a family based on a single worker’s earnings record.
It’s important to note that the specific benefit amount you’ll receive depends on several factors, including your earnings history, when you choose to claim benefits, and whether you have other income sources (e.g., pensions, investments). The SSA provides personalized benefit estimates based on your earnings record, and you can access these estimates through your online Social Security account.
Keep in mind that additional factors are needed, such as spousal benefits, survivor benefits, and potential reductions for early claiming. It’s advisable to consult with the Social Security Administration or a Retirement Counselor to understand your estimated Social Security benefits based on your unique circumstances.
How to Maximize Your Lifelong Benefits
We are here to help you every step of the way
If I start benefits early, how much will my payments be reduced?
If you choose to start receiving Social Security benefits before your full retirement age (FRA), your monthly payments will be reduced. The amount of the reduction depends on how early you begin taking benefits. Here’s a general overview of the reduction percentages based on the number of months you claim benefits before your FRA:
- Up to 36 Months Early: If you claim benefits between age 62 (the earliest age you can claim) and your FRA, your benefit amount is reduced by approximately 5/9 of 1% (or about 6.67%) for each month you claim early.
- More Than 36 Months Early: If you claim benefits more than 36 months before your FRA, there’s an additional reduction of 5/12 of 1% (or about 5%) for each additional month you claim early.
For example, if your FRA is 67 and you decide to claim benefits at 62, you’ll claim 60 months (5 years) early. The reduction for those 60 months would be around 30% (5/9% per month for the first 36 months and 5/12% per month for the additional 24 months).
Keep in mind that these are approximate percentages, and the exact reduction may vary based on your specific FRA and birth year. Also, the reduction is permanent, meaning your monthly benefit will remain at the reduced amount for the rest of your life, with only annual cost-of-living adjustments applied.
Before making a decision about when to start Social Security benefits, it’s essential to consider your individual financial situation, goals, and other sources of income, and it may be beneficial to consult with the Retirement Counselor.
What is the maximum Social Security benefit amount?
The maximum Social Security benefit amount you can receive depends on your earnings history and the age at which you claim benefits. As of 2022, the maximum monthly benefit for someone at full retirement age (FRA) is $3,345. However, this amount can change from year to year due to cost-of-living adjustments.
To qualify for the maximum benefit, you would typically need to have earned the maximum taxable amount for at least 35 years, which is subject to annual changes. The Social Security Administration calculates your benefit based on your highest 35 years of earnings (adjusted for inflation) and applies a formula to determine your primary insurance amount (PIA). If you start benefits before your FRA, your monthly payments may be lower than the maximum amount.
It’s important to note that not everyone will receive the maximum benefit, as it depends on your earnings history and other factors.
If you’re uncertain about your expected Social Security benefit, you can create an account on the Social Security Administration’s website to get an estimate based on your specific work history and circumstances.
Do not hesitate to contact us if you need assistance.
How to Maximize Your Lifelong Benefits
We are here to help you every step of the way
How do non-U.S. citizens or immigrants qualify for Social Security benefits?
Non-U.S. citizens or immigrants may be eligible for Social Security benefits if they meet certain criteria. The eligibility for Social Security benefits is typically based on your work history and immigration status. Here are some key points to consider:
- Work History: To qualify for Social Security benefits, you generally need to have earned a specific number of Social Security “credits.” These credits are earned by working and paying Social Security taxes. The number of credits required depends on your age at the time you apply for benefits. For example, as of 2022, you need 40 credits to be eligible for retirement benefits.
- Lawful Permanent Resident: If you are a lawful permanent resident (green card holder) and have earned enough credits, you can generally qualify for Social Security benefits like U.S. citizens. Lawful permanent residents can also be eligible for survivors’ and disability benefits.
- Non-Citizens Without a Green Card: If you are a non-citizen living in the United States but do not have a green card, you may be eligible for certain benefits if you are legally present in the U.S. under specific immigration categories. For example, refugees, asylees, and individuals with certain visas may be eligible for limited Social Security benefits.
- International Agreements: The United States has agreements with some other countries that may allow non-citizens to qualify for Social Security benefits even if they have not earned enough U.S. credits. These agreements can affect eligibility, and the rules vary by country.
- Undocumented Immigrants: Undocumented immigrants are generally not eligible for Social Security benefits based on their work history, although they may still be able to receive certain types of assistance in some states.
It’s important to note that the rules and eligibility criteria can be complex and may change over time. If you are a non-U.S. citizen or immigrant and have questions about your eligibility for Social Security benefits, it’s advisable to contact the Social Security Administration or consult with an immigration attorney or a retirement counselor who specializes in these matters to get personalized guidance based on your specific circumstances.
Get Help From Our Investment Advisory Team
Investing can be a Fun and Rewarding Experience
Table of Content
Get Help From Our Retirement Advisory Team
Investment Ideas & Market Info:
Each month, we provide you with timely updates on market trends, industry shifts, and economic insights you need for managing your money through all market conditions.
Sign Up to join the free investing newsletter.
Save for Real and Make Extra
- 1
- 2
- 3
- 4
Social Security in Simple Terms