Unexplored in this article are opportunities for spouses of high earners to collect their own benefits early and then switch over to half their spouses later, increasing their total benefit amount. It even has a calculator so you can tell the effect of early retirement (before FRA) on spousal benefits. Scroll down to the year of your first recorded earnings and see your bend points and estimated benefit at the bottom of the spreadsheet. The 2022 Guide to Calculating Social Security Benefits Social Security's got a problem on its hands. However, I dont think the reduction applies to survivor benefits if the widow/widower has reached FRA, even if he/she took his/her own benefits or spousal benefits before his/her FRA. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed advisors advisor. How much can Social Security recipients earn in 2022? If the number of months exceeds 36, then the benefit is further reduced 5/12 of 1% per month. You can use a copy of your Social Security statement that provides your earnings history to plug your own numbers into the formulas below. How much you receive depends on your age and income. [email protected] The next step is to convert your AIME into a primary insurance amount (PIA) by running it through a calculation called "bend points." To understand this calculation, you need to go back to 1979, the year of the Three Mile Island disaster, the introduction of the compact disc and the Iranian hostage crisis. The higher earner should probably still delay, but it isnt as large of a benefit as I said it was. Social Security uses a process called "wage indexing" to determine how to adjust your earnings history for inflation. "Benefit Formula Bend Points.". What Are Social Security Benefits? Cookies collect information about your preferences and your devices and are used to make the site work as you expect it to, to understand how you interact with the site, and to show advertisements that are targeted to your interests. ($10,141-$6,172) = $3,969*.15 = $595.35, The PIA is the sum of the three calculation results: ($921.60 + $1,647.35 + $595.35) = $3,164.30, First 36 months: 5/9 = .5555 * 1% = .005555 * 36 months = .19999 or 20%*, Remaining 24 months: 5/12 = .416666 * 1% = .00416666 * 24 months = .0999 or 10%. "Increase for Delayed Retirement. The lower earning spouse cant just switch on his/her own. You will be sent a link to the file and a confirmation to receive notifications of new posts. Are Spousal Social Security Benefits Retroactive? For a pre-retiree, I see Soc Security as having multiple uses to a long term investor. Im not sure thats true about the reduction to future spousal benefits from filing at 62. In 2022, that amount is $147,000. Knowing where you are in relationship to the Social Security bend points may incentivize you to work a little longer or to retire a little sooner. If you choose to begin to receive benefits before you reach your full retirement age, one or both of the following calculations will apply: Therefore,if your FRA is age 66, your benefits would be reduced by 25% if you begin taking them at age 62. Cumulative Growth of a $10,000 Investment in Stock Advisor, Join Over Half a 1 Million Premium Members And Get More In-Depth Stock Guidance and Research, Copyright, Trademark and Patent Information. For someone who worked all of their adult life at average earnings and retires at age 65 in 2022, Social Security benefits replace about 37 percent of past earnings. These different tiers, or bend points, are set by law. 1% back elsewhere. This reduction will still apply when he/she switches over to spousal benefits, as well as to his/her own benefits taken at age 62. Successful investing in just a few steps. Scroll down to the year of your first recorded earnings and see your bend points and estimated benefit at the bottom of the spreadsheet. How Social Security "Bend Points" Help You Get a Bigger Check If I continue to work until age 70, that benefit will increase to perhaps $3,700 a month. Yes, you and your employer invest $149 a year throughout your career in exchange for $1,080 a year during retirement. ", Social Security Administration. Will it change how much or how long you work? For our example worker, who was born in 1953 and turned 60 in 2013, the highest 35 years of wages total $1,919,040. Social Security benefits are payments made to qualified retired adults and people with disabilities, and to their spouses, children, and survivors. Of course, another complex formula is used to determine how much more you will receive if you wait. Market-beating stocks from our award-winning analyst team. PSA: The Social Security national average wage index and the "bend It functions as a tax preferred, inflation adjusted, no-default bond. For people with 20 or fewer YOCs who become eligible for benefits in 2023, the WEP reduces the first factor from 90% . Divide by 420 and you get an AIME of $12,250. In 2022, the wage limit is $147,000. The fourth principle is that all of your earnings are adjusted for inflation. Applying the bend points to this (see the Bend Point article for details) we come up with a tentative PIA of $2,293. What are your Social Security Bend Points | CLA (CliftonLarsonAllen) It goes from 90% credit to 32% credit to 15% credit to 0% credit. Either way, it is good to know where you stand. Have I Lost the Right to Collect Spousal Social Security Benefits Before My Own? Your PIA is calculated at age 62. The benefit is reduced by 5/9 of 1% for each month before the normal retirement age (67), up to 36 months. It assumes the employee has worked from 1982 through 2021. To this we apply the COLAs from the point [], [] Social Security Bend Points Explained []. Twitter: SterlingRaskie The adjustment is called a cost-of-living adjustment (COLA). "Benefits for Spouses.". That includes if you file early for your retirement benefit say, at 62, as in this scenario and switch to spousal benefits later. I just hope the politicians dont take away Social Security and Medicare now that we have reached the point where we are collecting. Discounted offers are only available to new members. If my wife gets a job, she wont also pay social security tax, will she? Ive already paid all mine due to my clinical income, so an additional dollar paid to me only pays income and Medicare taxes. So if theres a dual income couple that maxes out social security for 35 years, whats the max possible payout? But I wondered where she was at in relation to the bend points and especially whether her benefit was higher than 50% of mine. It turns out that in 2022 the first bend point comes at an AIME of $1,024. ", Social Security Administration. The bend points implement this skew relative to each worker's AIME. The points on the graph bend as the rate of inclusion changes. How Are Social Security Benefits Affected by Your Income? It already is paying out more in benefits than it collects in payroll taxes, and the trust fund it's relying upon to close the gap is expected to run dry in 2034, triggering an across-the-board 25% cut to benefits.