Social Security For Dummies
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After you figure out your full retirement age, you can get a ballpark idea of your monthly benefit. Currently, the average retirement benefit is about $1,328 per month (in January 2015), but benefits go much higher, depending on your earnings history and when you begin collecting.

It’s easy to get at least a rough estimate of your retirement benefits. Just use one of the SSA’s online calculators — the Social Security Quick Calculator or the Retirement Estimator. The Retirement Estimator is especially useful, because it also gives you projected amounts for retiring early at 62, waiting for the full retirement age, or delaying all the way until 70. (You also can get estimates customized to your personal situation by using AARP’s Social Security Benefits Calculator.)

If you use the SSA’s Retirement Estimator, you’ll see roughly how much Social Security you could get, especially if your earnings don’t skyrocket or crash between now and the time you retire. If you haven’t yet done so, you can use the Retirement Estimator as a starting point to think about how much money you can count on in retirement.

Whether the Social Security numbers look small, large, or in between, remember that Social Security is meant to be just one part of your financial foundation.

You stand to get much more money if you can delay collecting Social Security past your full retirement age. For example, if you were born between 1943 and 1954, your Social Security payment at 62 is 25percent lower than if you wait until 66 (your full retirement age). If you hold off to age 70 — four years past your full retirement age — the benefit balloons by 32 percent.

These differences can add up to real money over the years — or decades. Consider the following example:

Elisa was born in 1953 and wants to know how she would be affected by choosing different dates to retire. She goes to the Retirement Estimator tool and quickly types in some basic information, including her name, Social Security number, state of birth, and mother’s maiden name. She also plugs in the $160,000 she earned last year. The Retirement Estimator lists the estimated payments she would get for retiring at three different ages.

If Elisa waits until her full retirement age of 66, she’ll get about $2,615 per month. If she waits until 70 to collect benefits, she’ll get about $3,512 per month. And if she wants to start as soon as possible, at 62, she’ll get a more modest $1,930 per month.

Elisa knows that longevity runs in her family, so she wants to find out how much she’ll collect from Social Security if she lives to 90. To get the answer, she calculates the number of months she would receive benefits in three different cases — starting at 62 (336 months), starting at 66 (288 months), and starting at 70 (240 months). Then she multiplies the number of months by the estimated benefit provided by the online tool.

If Elisa starts the benefit at 62 and lives to 90, she could end up with more than $648,000 over her lifetime, not even counting increases for inflation (336 months between 62 and 90, multiplied by the estimated benefit of $1,930 per month for benefits starting at 62). If she starts at 66, her lifetime collection would exceed $753,000. And if she starts the benefit at 70, she ends up with more than $842,880. The difference between starting benefits at 62 and at 70 comes to $194,400 for Elisa.

Your decision on when to begin retirement benefits makes a real difference in your monthly income. The numbers here are based on a retirement age of 66 and a monthly benefit of $1,000. They may differ based on your year of birth and other factors.

Changes on Social Security benefits people get based on the age they start receiving them.

Credit: Source: Social Security Administration

Waiting to take retirement benefits beyond your full retirement age could prove especially important for Baby Boomers and, right behind them on the age ladder, members of Generation X. For people born in 1943 or later, the retirement benefit expands at a rate of 8 percent per year (or 2⁄3 of 1 percent per month) for each year you delay claiming (up to age 70) after reaching full retirement age.

Year of Birth Yearly Rate of Increase Monthly Rate of Increase
1933–1934 5.5 percent 11⁄24 of 1%
1935–1936 6.0 percent 1⁄2 of 1%
1937–1938 6.5 percent 13⁄24 of 1%
1939–1940 7.0 percent 7⁄12 of 1%
1941–1942 7.5 percent 5⁄8 of 1%
1943 or later 8.0 percent 2⁄3 of 1%

If you were born on January 1, refer to the previous year.

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