Planning is half the battle, and to plan well, you need the right information.
Is retirement on your near-term radar? If so, then congratulations! You deserve some time to enjoy life on your terms. And if you’re like most retirees, your retirement income will consist of a combination of Social Security benefits and your own retirement savings.
Before you claim the former (and start living on the latter), there’s one thing you might want to do before pulling the trigger.
Before doing anything, find this out
How much is your monthly Social Security benefit going to be?
You might be surprised how many people don’t know the answer to the question. Although this year’s average monthly payment stands at $1,976, that’s a figure reflecting a wide range of inputs. Plenty of people are only collecting a few hundred bucks per month, while a handful of retirees are cashing checks in excess of $5,000. Given the sky-high cost of living these days, the difference between the two extremes can be significant. This is particularly true for lower earners, for whom Social Security benefits can make up on the order of two-thirds of their retirement income (if not more).
So, before retiring and then filing for benefits and just hoping for the best, one thing you’ll absolutely want to do before claiming is determining exactly how much you’ll be collecting. The dollar amount is there for the asking.
OK, it may not be super-simple to find out. If you want to do it online you’ll need to create a Login.gov or ID.me account, which means you’ll also need an email address. And just to ensure your security, these accounts can be a bit of a pain to set up. Once they’re established though, it’s relatively easy to enter and navigate the SSA.gov website. Look for the link to “Your Social Security Statement,” and you’re there. You’ll find a personalized monthly benefits estimate at a range of claiming ages between 62 and 70.
Or if you’d rather talk to a person, you can contact the Social Security Administration by phone or even visit an office. Either can provide you with the same information. Just be prepared to prove you are who you say you are, with documents like a government-issued ID or U.S. Post Office-delivered mail.
You may be able to boost it, even if just a little bit
But the amount is irrelevant if you can’t do anything about it?
Well, that’s just it. You can do something about it. While it can’t be changed dramatically, it might be possible to beef the number up bit by postponing your retirement a little bit longer.
See, the amount of your Social Security benefit is determined by three factors. One of them is your age — the older you are when you claim, the bigger your check. For every month you wait to claim, you’ll collect a little more money, until age 70 when retirement benefits max out. Not a lot, but at least a little. On average, every year you wait adds on the order of $100 to $200 to your eventual monthly payment.
Another factor influencing the size of your Social Security benefit is your lifetime earnings — the more taxable income you earn, the more you get back in retirement. There’s obviously not a whole lot you can retroactively do about your earnings history at this point in your life. But, if you happen to be earning better-than-average money right now, there’s a modest argument to be made for continuing to work at least a little bit longer.
Image source: Getty Images.
Perhaps the top reason to find out how much your Social Security check is going to be before claiming it, however, is the specific number of years’ worth of earnings used to determine your future payment. The Social Security Administration looks at your 35 highest-earning (inflation-adjusted) years to figure out what it owes you.
Not working 35 full years doesn’t mean you won’t collect anything — the SSA will simply assign you zero earnings for every year less than 35 that you worked, lowering your calculated payment. And, earning a good income for more than 35 years doesn’t add any net benefit. Again, you only get credit for your best 35.
If you’re in your 33rd or 34th year of work and you’re making better-than-average money though, another one or two more years on the job can help ratchet up your future payments. The SSA can even give you a rough figure of how much this extra time might improve your eventual benefit.
Even if only for budgeting purposes
If you’re ready to retire and claim your benefits right now regardless of the amount of Social Security you’ll be receiving, that’s fine. There’s nothing more valuable than your time. So, go ahead and file even if waiting a while longer might boost your number. It won’t bolster your benefits enough to make a massive difference.
Nevertheless, even if only for budgeting purposes, find out how big your Social Security check’s going to be before initiating these payments. You’ll at least want to make a rough mental budget before you start living on this amount of income.